Despite the uncertainty of Brexit, the UK's fintech industry has continued to grow which has led to a record amount of investment in UK fintechs. It is difficult to imagine that EU financial institutions may not have access to the developing UK market post-Brexit.
It is unclear how financial services firms based (and licensed) in mainland Europe will be able to service their UK customers after the Brexit transition period ends in December 2020. Licensed firms relying on the ability to freely passport their services across EU Member States may not be able to passport their services into the UK.
The creation of an equivalence regime would benefit both the UK and EU as it may allow UK licensed financial services firms to offer their services in the EU without having to obtain a EU licence, and vice versa for firms based in the EU wishing to provide their services in the UK. However, recent speculation about an equivalence regime has been dismissed by the EU’s chief negotiator, Michel Barnier.
In the absence of an agreement between the UK Government and the EU that either (1) allows the continuation of the passporting regime; or (2) facilitates the creation of an equivalence framework, firms wishing to access the UK market may be required to setup a UK subsidiary and apply for the relevant authorisations.
Gibraltar has an important role to play in the above scenario as its continued access to the UK market post-Brexit means it is a gateway for EU businesses. It is a role that Gibraltar is familiar with as it is already home to some of the UK’s largest financial services firms, insurers and gaming companies, that use it as a strategic location for servicing their UK customers. Gibraltar's emerging fintech ecosystem centred around blockchain technology also makes it an attractive proposition for start-ups and established businesses.
EU firms wanting to access the UK market should therefore explore the possibility of setting up their subsidiaries and developing a presence in Gibraltar in order to service UK customers.
The UK has set a new record for investment into financial technology startups, drawing in over $4.9bn last year and putting it at the top of the European leaderboard in spite of uncertainty over the UK leaving the European Union on Friday. Overall, European fintechs raised $8.5bn, meaning the UK contributed to over half of all the continent’s investment in the space, according to new research by Innovate Finance. Indeed, seven of the 10 biggest European fintech raises last year were by British companies.
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