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Brexit: SMEs remain cheerful but industry fears grow over investment and FinTech

As we pass the three month mark since June’s pivotal EU referendum, the outlook for London’s businesses remains decidedly mixed even if the predicted economic apocalypse has not quite come to pass.

Figures released today by Santander show that, anecdotally at least, it has been business as usual for the capital’s small and medium sized businesses, who have weathered some of the immediate Brexit uncertainty and remain positive about their prospects for the next 12 months.

The bank surveyed 119 SMEs in London as part of its Breakthrough Festival tour and found that just 9% were pessimistic about the capital’s economic prospects following June’s vote, compared to 45% who were optimistic.

Just 16% of those surveyed believe that London’s economic prospects will worsen over the next 12 months, as heartening export and consumer spending figures boost sentiment.

FinTech finito?

However, the positive noises coming from the capital’s small business owners contrasts with ominous warnings from industry figures who today have warned that Brexit risks stemming the flow of crucial European investment and may soon threaten London’s status as a world-leading FinTech hub.

A new report by the Association of Chartered Certified Accountants has highlighted some of the regulatory hurdles that the sector will face once Brexit negotiations are underway, with continued EU passporting rights pinpointed as crucial to the FinTech industry’s continued strength.

Anthony Walters, ACCA’s head of policy for Western Europe, said that London’s regulatory environment has played a major role in fostering a context conducive to financial innovation, but that this could soon be under threat.

He said: “The UK’s FinTech sector currently employs more than 66,000 people, with approximately a third coming from Europe.

“Inevitably the potential burdens of securing work permits for highly skilled individuals in a dynamic industry creates significant uncertainty, as does the regulatory headache which would be created by the loss of passporting rights for UK-based banks operating in the EU.”

Walters added that, while the signs were positive that London can remain resilient to the buffering winds of Brexit uncertainty, the ‘potential of FinTech to transform finance’ means that the industry should be an important consideration in the exit negotiations.

Industrial investment shortfall

Separately, business leaders from across the engineering and technology sector have voiced their concerns about the government’s industrial strategy which they believe will flop unless current EU investment streams are replaced.

The economic plan, which has been established as a key plank of Theresa May’s premiership, comes with a renewed commitment to the UK’s manufacturing, engineering and technology businesses which the government hopes will keep British industry competitive on the global stage.

However, at a policy forum hosted by the Institution of Engineering & Technology (IET) in London on Tuesday night, leading industrial figures have warned that public and private funding must step in to replace the expected shortfall in seed funding and grants for smaller businesses that will be a consequence of Britain leaving the EU.

Naomi Climer, IET President, commented: “There has never been a more important time to support the growth of UK engineering and technology to make us globally competitive. The sector is the biggest of all UK exports and it is at the heart of Britain’s international competitiveness, its R&D and innovation.

“We want to see it at the heart of the Government’s Industrial Strategy, with the right levels of investment and a particular focus on supporting the SMEs that are so important to our success as a global innovation centre.”

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