Speech by Tulip Siddiq MP, shadow Economic Secretary, at IFGS, 18 April 2023

Introduction

Thank you Louise, and thank you to everyone at Innovate Finance for organising this fantastic global summit. 

I am aware like everyone else that the last 12 months have been challenging for the international FinTech sector – the collapse of Silicon Valley Bank was felt across the industry, and we have seen a decline in global investment.

But despite these challenges the UK has remained a top destination for FinTech investment – attracting $12.5 billion dollars of investment in 2022 – second only to the US and more than all of the next 10 European countries combined. 

The strength and resilience of our financial services sector;

our reputation for high regulatory standards and legal services;

our world-leading universities and unrivalled access to a highly skilled tech workforce, all come together to make Britain the destination in Europe to invest in FinTech. 

And I’m grateful to have been given the opportunity today to talk about how a Labour government will build on these advantages. 

And before anyone asks me, I don’t have any inside information on when the next general election will be. 

But what I do know is that our manifesto will very clearly set out our ambition to make Britain the best place to start and grow a FinTech company, not just in Europe but the world. 

FinTech as a force for good

Keir Starmer has said to me that this mission has never been more important. 

I have now been Labour’s Shadow City Minister for just over a year, and during this time I have blown away by the work of FinTech companies to provide new, innovative solutions to the biggest challenges of the 21st Century, whether climate change or the cost-of-living crisis. 

For example, Earthchain based in Leeds is utilising blockchain technology to enable businesses, including a major bank, to gain emission insights from their spending data to incentivise greener behaviours.

While firms such as Atom Bank are leading the way in supporting people through the cost-of-living crisis. The bank has developed technology which allows them to identify and signpost customers in financial difficulty to appropriate support such as the debt charity, StepChange who I met with recently and was so impressed with. 

Rachel Reeves and I are very aware that supporting small and medium sized British businesses to modernise and thrive will be key to getting our economy growing again and boosting living standards after more than a decade of stagnant growth and poor productivity. 

FinTech will be at the heart of this – a recent report by the British Business Bank found that in 2022, challenger banks accounted for 55% of all lending to UK SMEs.  

Regulating FinTech outside the EU

But Rachel and I are also very aware that if the full potential of FinTech as a force for good is to be realised, the state will have to play a proactive role in championing new and exciting technologies 

That’s why I’m proud to announce that a Labour Government will work hand-in-hand with your sector to transform our economy, this will include reviewing how Open Banking rules can be applied to a wider range of services, or how the gap between financial guidance and advice can be addressed through new AI driven technologies.

We are also fully committed to supporting the sector to take advantage of opportunities outside of the EU. I gave my full support to the Financial Services and Markets Bill, which will empower the FCA and PRA to tailor FinTech regulation to meet the needs of the UK market. 

While EU regulation of financial technologies can often be overly prescriptive, Labour would take a more outcomes-based approach to allow the UK to both protect consumers and benefit from the gains in productivity that new technologies can bring. 

However, you don’t need me to tell you that Europe will always remain an important export market for UK FinTech, and a stronger relationship with our closest trading partner will be key to ensuring the future competitiveness and growth of the sector. 

A Labour Government would prioritise finalising a memorandum of understanding on regulatory co-operation with the EU, and would support UK FinTechs to access European talent by negotiating for mutual recognition of professional qualifications for our service sectors. 

Tech workforce

The UK must also do much more to foster domestic talent – FinTech can’t reach its full potential while neglecting the skills of half the workforce. We know that a significant gender pay gap still exists in the sector – Ernst & Young estimate that it stands at a shocking 22%. This is shutting women out of top leadership positions. 

Deloitte estimates that only 17% of senior Fintech role are held by women, and we know that women make up just 11% of FinTech board seat holders. This is simply unacceptable. 

That’s why Labour has committed to working with the sector and with regulators to address the barriers facing women in FinTech and ensuring that the pioneering women who want to set up and grow businesses get a fair shot at accessing the capital they need. 

I was recently invited to a breakfast briefing by Amanda Blanc to celebrate the $10 million investment by Aviva into the Anthemis Female Innovators Lab fund and there was a very powerful discussion about how we as a country need to develop and support the pipeline of female talent in fin-tech and financial services.

Equally, the future strength of the sector can’t depend on London alone. As a London MP – representing Hampstead and Kilburn, home to many tech entrepreneurs and City workers – I always welcome investment in my city. 

London attracts around 9 billion dollars of fintech investment every year. This should be celebrated. But this compares to just 700 million dollars invested in financial technology companies based outside London and the south-east.

For example, Greater Manchester is emerging as FinTech centre in the North West. Companies in the city such as AccessPay – a fintech company enabling companies to make payments and manage cash more efficiently, and Nivo – a secure instant messaging platform that connects consumers to financial institutions – are leading the way. 

But I want to see FinTech hubs in every region.

That’s why we need to increase the supply of domestic talent and access to investment in every part of the country. Labour would create Tech hubs in every region by establishing a new expert body – Skills England – to co-ordinate efforts between businesses and the education sector to ensure that the regions have the skills they need to benefit from technological change. 

Pension fund investment in FinTech

But if the UK is to reach its potential at the top of league table in FinTech, we need to get more capital behind innovative FinTech firms to drive growth in every part of the country. 

We know that capital locked in pension funds is vital for the growth of innovative companies.

But compared to some of our peers the UK sees relatively little patient capital funding coming from pension funds. While in the US, around 70% of venture capital funding comes from pension funds, in the UK this figure is under 20%.

This means that too often we see UK FinTech firms being bought by bigger players in the US or going elsewhere, when they look to scale-up and grow. 

That’s why Rachel Reeves commissioned a group of industry leaders to explore how to address this. The report published at the end of last year, and its findings will be an important starting point for a future Labour Government.

This includes an acceleration of the pooling of pension fund cash to be directed towards high-growth start-ups to fill the multi-billion pound funding gap facing the sector;

Incentivising Local Government Pension Schemes to invest in regional businesses, such as Fintech companies, and;

Supporting pension funds to invest alongside the British Investment Bank in high growth firms. 

Conclusion

So, in conclusion, we as a Labour Party are committed to fostering and building on the UK’s key advantages that underpin our status as a global centre for FinTech. 

Whether that’s the competitiveness of our financial services sector, our high regulatory standards or access to a highly skilled workforce. 

But rest assured Labour’s ambitions for your industry won’t stop there.

We will work with you to unlock the full potential of FinTech to radically transform the financial services sector, to improve transparency and deliver green growth.   

We will champion the adoption of new technologies in every part of the economy, and unleash billions of pounds of pension fund capital for investment in the businesses of the future.

Together, we will ensure that the UK is the best country in the world to start, scale and grow a FinTech.

Thank you.