ArchOver's Angus Dent is a Forbes Contributor and is requested by them to share opinion on topical issues. This is Dent's most recent blog.
It seems pigs don’t fly after all. In a shock to absolutely nobody, Theresa May’s Brexit deal was voted down in parliament by an unprecedented 230 votes. But while this defeat certainly has a huge impact on the Brexit proceedings, when it comes to financial services, yesterday’s vote didn’t much matter at all.
The fact of the matter is that the deal failed to make any promises to the UK’s financial services sector, leaving us in the cold and our future up in the air. May’s argument seems to be that we’re big enough to fend for ourselves – but this is a risky tightrope to walk.
With a Brexit deal that doesn’t protect financial services, the European Union will want to take as much of their work as they can into their EU bubble. The only question is how quickly this will take shape. With so much expertise in the UK’s FS sector, people and ideas will have to be exported across the continent, which will take time and money – but isn’t impossible.
While this is a noble aim, it might leave the UK in a less than enviable position. Think of financial services as the new cricket – we can teach the world how to do it, but in time, they’ll beat us at our own game.
This is even more evident when it comes to Britain’s most 21st century export: fintech. It’s safe to say the UK is the world hub for this global phenomenon, and despite any Brexit deal, this won’t change anytime soon. Technological advancements in FS will be global and borderless for a long time yet, and this innovation will continue to come in large part from the streets of London’s Silicon Roundabout.
But long-term, there’s a much bigger risk for the future of UK fintech: the transition of China and India from the ‘copying’ to the ‘origination’ stage of economic development. A good or bad Brexit deal won’t make the slightest bit of difference – so we should be careful not to take our eyes off the real threat.
When it comes to financial regulations, the picture is a little brighter, as no deal is likely to have a major impact. Ultimately we want to do business with the EU, so we’ll continue to play by their rules (which, after all, are our rules anyway). This is good news for big banks and smaller challenger FS companies, though fintechs face another potential problem.
If we want to remain competitive for decades to come, we should take a leaf out of Singapore’s book and look to transform. Regulation will need to adapt, but we’ll also need to stay in line with EU regulations if we want to continue our working relationship – getting this balance right will be no mean feat.
In all, May’s defeat means nothing for the future of financial services in the UK. If a deal doesn’t make any promises for the sector, then we simply won’t care that it gets voted down left, right and centre. With other countries nipping at our heels and our FS crown close to being snatched away, May and the Tories should ensure that the next deal tabled in parliament accounts for the future of one of the country’s most valuable industries.