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'Fintech' gives UK the edge in European tech market, says expert

Out-Law News | 25 Feb 2015 | 4:25 pm | 2 min. read

London's thriving financial technology industry is enabling the UK to remain the number one European centre for technology sector investments, an expert has said.

According to new research by investment data analysts CB Insights, there were more  venture capital (VC) technology company investment deals struck in the UK than anywhere else in Europe in 2014. There were 225 VC investments in technology companies in the UK last year, compared to 154 deals in Germany and 63 deals in France.

The value of the investments in VC-backed UK technology companies last year was more than $1.6 billion, up 78% on 2013 figures. The comparative 2014 figure for Germany was $1.2bn.

A separate report by KPMG found that the UK's technology sector is outperforming the rest of the UK economy by its widest margin in nearly six years.

"The UK is the main hotbed for sophisticated VC investors in Europe and has the most prolific tech start-up scene on the continent," expert in corporate financing arrangements in the technology sector Thilo Schneider of Pinsent Masons, the law firm behind Out-Law.com, said. "It also tends to be the place where US-based investors first look to when looking for investment opportunities in the European tech market."

"The UK has a very friendly and supportive regulatory and tax regime for start-up businesses, which helps support the UK government's claims that the UK is 'open for business' and a place that supports innovation and entrepreneurship," Schneider said. "For example, unlike in other jurisdictions, start-up businesses in the UK are not subject to minimum capital requirements and do not face being tied-up dealing with trade union issues. You can launch a company on no capital in the UK within 24 hours."

Schneider said the UK's position as the number one place to invest in technology companies in Europe was aided by a growing financial technology industry, operating predominantly out of London.

"Certain sections of the UK's technology sector are performing well, including businesses offering data analytics solutions for the 'big data' age, and those developing and providing mobile and cloud-based technologies," Schneider said. "However, it is perhaps the fintech market that is giving the UK the edge over rival European markets," Schneider said.

"London is the foremost financial centre in Europe and arguably the world and so the existing bank of financial services knowledge and expertise in the City makes London an attractive place for fintech companies to launch and for fintech investors to look for investment opportunities," he said.

Schneider said that although financial services businesses are heavily regulated, and that there had in recent times been a tightening of rules affecting some UK financial technology companies such as crowdfunding platforms, an initiative has been designed to help those companies address regulatory and compliance hurdles.

"The Innovation Hub, launched last year by the UK's Financial Conduct Authority (FCA), gives businesses looking to enter the financial services market the chance to raise issues they have with the regulator and get informal help on how to address any regulatory compliance issues," Schneider said. "The FCA is aware that it needs to make financial services regulation accessible and make itself available not just to established firms but those looking to enter and disrupt the market also. This is a proactive approach that fintech startups should welcome."