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London stock market rules need overhaul to spark UK fintech IPOs, says Kalifa review

New stock market listing rules in London, supportive regulation and supportive trade policy are among the measures needed to enable UK fintech to remain a global force in the future, according to the Kalifa fintech review.

The UK might lose its position as a global leader in financial services unless the government supports what is one of its most important export industries, said Ron Khalifa, the chairman of Worldpay, who was appointed by Chancellor Rishi Sunak a year ago to carry out an in-depth review of the UK’s fintech sector.

“The trajectory of UK fintech is at an inflection point of opportunity – and risk,” he said.

“While the UK’s position is well established, its future is not assured.

“There are three broad threats to our fintech leadership position, each of which point to three opportunities that must be grasped through immediate action to create an economy that works inclusively and sustainably for its citizens while securing the ambitions for ‘Global Britain’: competition from overseas centres such as Singapore, Australia and Canada, Brexit’s creation of regulatory uncertainty, and the acceleration of digital adoption around the globe in the wake of the coronavirus pandemic.

Recommendations of the full Khalifa fintech report include:

  • a “digital finance package that creates a new regulatory framework for emerging technology”, with priority given to new areas for growth and specific policy initiatives to “help create an enhanced environment for fintech, such as digital ID and data standards”.
  • launching a £1bn ‘fintech growth fund’ and encouraging UK pension funds to divert some of their £6trn to stop early stage companies looking to foreign trade buyers and “robbing the UK of fintech IPO activity”
  • retraining and upskilling adults in support of UK fintech by ensuring access to short courses from high-quality education providers at low cost
  • improving the listing environment through allowing companies to IPO with a lower free float of available shares, create a dual class shares and relaxing pre-emption rights.
  • the government to implement a “scalebox” that supports firms focusing on scaling innovative technology, which should include enhancing the Regulatory Sandbox and introducing measures to support partnering between incumbents and fintech and regtech firms.
  • ensuring fintech forms an integral part of trade policy, for the UK to “build upon early successes and ongoing industry engagement and further develop its global trade policy in relation to fintech”
  • expanding R&D tax credits, Venture Capital Trusts and the Enterprise Investment Scheme
  • unlocking institutional capital to create a £1bn “fintech growth fund of sufficient scale to act as the catalyst in developing a world leading ecosystem”
  • drive international collaboration through the Centre for Finance, Innovation and Technology (CFIT), and launch an International Fintech Taskforce
  • and also supporting UK regional specialisms, with support for the top 10 fintech clusters, national coordination through the CFIT and further R&D support.

The recommendations have backing from many in the world of finance, including the City of London, whose policy chair Catherine McGuinness said: “This is a pivotal moment for the UK. There are significant opportunities offered by fintech – an area in which London already has unmatched global appeal.

“But for the UK to retain its position as world leader and continue to attract investment into the sector, it is vital to offer an environment which supports innovation. The Kalifa review offers a roadmap to achieving this.”

Some of the measures could be included by Chancellor Sunak in his Budget next Wednesday.  

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