Podcast transcript: How attractive is the UK on a global stage
26 min approx | April 22 2020
Hi, everyone, and welcome to this EY podcast, which provides emerging insights from EY’s research on the UK FinTech ecosystem, commissioned by Innovate Finance and City of London. The research has been conducted to provide insights on how the UK compares to eight different markets around the world, and to develop specific considerations for the next stage of FinTech evolution.
Now, firstly, for all those listening, I hope your family, your friends, your colleagues are safe and well, as COVID-19 continues to unfold, globally. In these unprecedented times, it can be really hard to wrap our heads around the scale of challenges that everyday communities and businesses currently face, let alone think about the future and the long term.
Our research hopes to help the FinTech sector be stronger and more resilient, and we understand that many of the considerations and themes that we’ll touch on today may need to be picked up at a later date.
At this time, you may be thinking about the future of financial services and the lessons that we can learn from COVID-19. Within a few days, our personal, our working lives have dramatically changed and, through the use of technology, we’ve had to flexibly adapt the way we work, the way we connect with our family and friends, and the services that we consume.
Today’s theme is playing on a global stage. How do we nurture and access world-leading FinTech talent, both internationally and domestically? And how attractive is the UK on a global stage? My name is Shalini Shan, and I’m a director at Ernst and Young LLP in the UK Financial Services Strategy team. I’ll be your host today.
I’m very happy to be joined by Luke Waddington, CEO and founder of Blue Fire AI, Charlotte Crosswell, CEO of Innovate Finance, and my colleague, Seema Farazi, FSO, Global Immigration Partner. Welcome, everyone, and thanks for joining me today.
To start with, accessing world-class talent. Seema, COVID-19 presents extraordinary challenges for the macro-economy and for the mobility of people, in addition to pre-existing Brexit headwinds, so how do you think these national challenges will impact the FinTech talent pipeline? And what do you think FinTechs need to be thinking about to protect their people, their operations and success of their talent strategies?
Thanks, Sharli. As you know, even prior to COVID-19, access to foreign talent has really been one of the most commonly raised challenges for fast-growth UK FinTechs in particular with concerns around speed, cost, and process. Access to talent is of course critical to support UK FinTechs to scale. Around 42% of the UK FinTech workforce is drawn from outside of the UK versus around 28% for financial services as a whole.
Of that 42%, roughly two-thirds is drawn from the EEA. Now, of course, the scale of the travel restrictions that we’re seeing implemented to limit the impact of COVID-19 is really unparalleled and presents critical issues across the sector. What we’ve basically seen is the Schengen Area effectively spending its 25th anniversary in lockdown. There are well over 100 restrictions in play globally.
All of that creates real challenges for FinTech, particularly where they’re operating across multiple regions with talent regularly moving across borders. There is a real risk for employees who don’t hold permanent residence rights in the countries that they’re traveling to being denied entry. There are other risks as well around remote workers who may be stranded and while we’ve seen governments adopt very flexible approaches to prevent those individuals becoming overstayers, they nonetheless are restricted to the type of activity that was permitted on arrival.
So for example, opening the laptop and remote working may not be feasible in all jurisdictions depending on the nature of entry. So the crisis is really moving in phases around the world. Flight bans… We’ve seen them become almost total border closures. So it’s critical to consider at this point really, what is the exit path out of the crisis, learning from the experience of those at later stages of the pandemic. What we’re advising people start to think about now really is, what is the lockdown exit strategy so that you’re ready to move as restrictions start to fall away?
We’re very likely to see a move to a quite different cycle in global immigration where we have restrictions and easements coming in and out as we saw a couple of weekends ago with the reintroduction measures in Asia-Pac to deal with the risk of imported COVID. I think added on to that, we are likely to see a new psychology around movement and greater immigration controls being imposed around the health of travellers.
Of course, above all of that and perhaps one of the most challenging things in these testing times is really to do all of that within the values that align with your purpose and really actively planning to protect those values during a crisis.
Charlotte, with respect to nurturing the right type and base of domestic talent in the UK, what gaps do you think need to be plugged?
Thank you. We’ve certainly been looking and maybe over-reliant to overseas markets for bringing the talent needed for the FinTech sector, particularly around engineering, computer science, and data scientists.
I’ve been very encouraged by some of the moves across the UK, particularly in the east and northwest and into Scotland where they’ve actually been looking at how we bring in data scientists. Some of that will be a five to ten-year programme for that to take effect, but really identifying where financial services is moving to and how university degrees and secondary school education will have to change.
It’s important that we do teach children at an early stage that digital skills are not going to be a nice-to-have. They are absolutely fundamentally necessary. We’re expecting 90% of jobs created today to need digital skills. So that’s as much of teaching the teachers as teaching the children, showing them the types of jobs that are changing and why they might want to come and work in this sector, but also working with industry alongside academia to really identify where the gap is.
Deliberately the UK hasn’t brought through so many engineers in the past and that’s something that’s going to have to change. Otherwise we’re always going to be over-reliant. I think the one thing that is encouraging during the COVID-19 crisis is how much it hasn’t really mattered where people have been based. I know many clusters around the UK that… Potentially people don’t want to come to London and work, but that’s where the jobs have been created.
London-based companies haven’t been looking at leveraging those links around the UK and sometimes have just gone to overseas for overseas talent and outsourced. So it’s definitely an opportunity for us to take a step back and reassess where we are, leverage the incredible talent coming through some of the universities around the country, but also really getting industry to work much closer alongside academia to forecast the types of skills we’re going to need in the future.
Thanks, Charlotte. I think you’re right. This pandemic has really made us revisit how we leverage technology to be better connected within our businesses and within our communities and that’s something that FinTech has always been particularly good at. Luke, I’d like to get your perspective as a FinTech. What is Blue Fire AI’s approach to attracting and rewarding employees? How are you encouraging the best and brightest minds and are there any challenges that you face when recruiting talent?
Yes. Just to give a little bit of introduction, we’re based in Singapore, Hong Kong, India, London, and the US and Canada, so we get a good view of the global framework. I think the key thing for us is culture. We’ve had the luxury of being able to build that from the ground up where we didn’t have one because we were a new company. So culture for us was very important and we’re all about the people and the talent, so it was essential we create a culture which creates the best performance and the environment to work in.
I think this has now been stress-tested in the current environment. Does the culture stand up to keep your people safe? Does it stand up to communicate and bring them together? Does it stand up to be performant? So that’s a really important point. The other thing as well is about… at the heart of that culture is about being unconstrained because we’ve got new problems and even more now we’re getting more new problems with what’s happening that we need to solve.
We find that typical corporate structures and big company structures are very constrained by their nature and their size and the way they’ve been set up. So what we try and do is always keep an unconstrained view of life so that our talent has that aspiration and creativity can be harnessed. So being unconstrained is very important, especially when we’re solving problems. Then looking at the challenges, and the reason I made the introduction about our position as a company, we’re also fortunate that we get to see some of the best CVs from around the world.
There’s a massive amount of what we call IQ. So this is mathematics, academic-driven skill sets in terms of computer science and so forth. We just see that the price of that is actually going down because the supply around the world is very… Not only the quality but the quantity is very high. Then we look at the UK and what we really want is a blend of not just IQ but EQ. EQ are those skills and creativity, the example being, IQ being the builder and the EQ being the artist.
We look for a blend because the price of that talent is extremely high and the value of that talent is extremely high and therefore it’s what’s in demand. So what we find in the UK in comparison to those other countries is that the UK excels very much in that EQ area from a price-skill set, cost-reward benefit. I think that’s something that’s going to be very much needed as we go forward, especially solving some of the problems that are coming to us. This sort of skill set, this blend is quite difficult to find elsewhere.
Great. Thanks, Luke. Seema, reflecting on what Luke has just mentioned about that deep pool of technical talent that is available also in other markets, how do you think the UK’s immigration framework can adapt to ensure that the UK attracts the best global talent, particularly as we move beyond 2020 and towards, hopefully, a post-COVID recovery? Do you think actually that COVID might present opportunities to accelerate certain changes with existing immigration regimes?
Well, before COVID-19 happened, the UK’s immigration system of course is in the throes of the biggest reforms that we’ve seen in over four decades, triggered by Brexit, and at the time of this recording, those reforms are still planned for delivery in January 2021. That was an already challenging timetable. Nonetheless, that’s the current timeline, but it does present a unique opportunity really for the UK to better enable access to foreign talent for the sector and really try and consolidate the UK’s status as a global leader for FinTech.
We know in the background other markets, France and Australia, have been positioning themselves to better compete for that international talent pool that Luke was talking about through very specific tech visa solutions. So I think the key areas of need fall around things like high-growth FinTech businesses and a tech visa pathway that really has reduced friction and rigidity on things like endorsement, compensation structure, and particularly around equity compensation, a fit for purpose self-sponsor route allowing for flexibility, mobility, and experimentation.
The global talent route is really seen as too restrictive in this space and we do know that the government has committed to looking at some kind of additional self-sponsor route at some point in the coming year. Things like the removal of resident labour market testing… We know that the government has an intention and will remove that in January 2021, but why not bring that forward and deliver some kind of welcome easement to business now?
To the point that you made in your question, one of the really good things that we’ve seen with COVID-19 is the incredible potential for accelerated change in immigration and really for a rethinking of what’s achievable both from an operational and a policy perspective. The Home Office’s response and the flexible immigration policies that we’ve seen around COVID-19 have been very well received at this really difficult time and what we would strongly encourage is that they use this, they use these achievements, to deliver real flexibility and transformation in that new system.
Thank you, Seema. Luke, you mentioned that there were some other markets that you have first-hand experience of, particularly in Asia-Pac. What do you think that we can learn from these other markets, particularly around supporting seamless access to foreign talent?
Yes. I think it’s probably worth just framing a couple of examples and making it quite pragmatic and to the point. We operate in Singapore and there’s a government entity, Enterprise Singapore, and they have a specific set of visa programmes to allow us to bring in talent. So what that’s allowed us to do is actually consolidate quite a lot of our teams into Singapore. So we’re consolidating our team from India and some of the resources from Hong Kong all into Singapore and we get an upfront allocation of visas to be able to do that.
So that allocation of visas against certain criteria gives us stability. It gives us forward planning and it doesn’t mean it’s up to and we’re always worrying on each individual and each individual’s application because it’s done at an allocation level. There are certain, then, restrictions within the Singapore framework on certain quotas that they are putting in place between foreign-to-local workers, but I think specifically in the FinTech and the skills that we’re looking at, that’s not really ever been as an issue.
In Hong Kong there are very specific visas to bring in talent and there what we’re doing is much more working with… It’s probably more of a nature to our business in the sense that we’re working in lots of R&D frameworks. So anyone with master’s qualifications and PhD qualifications… Not only do we get the visa fast-tracking and application but also dedicated funding. So we get 30% wage support for master’s graduates and 50% wage support for PhD joiners.
So we get this collective encouragement of not just the immigration framework but also then the government support with it. Then there’s a very specific one visa situation between mainland China and Hong Kong and accessing talent into Hong Kong, which I think is a probably bit away from this podcast, but it’s also just there for completeness.
Thank you, Luke. I guess using that to move on to our second but very much related theme of the UK’s attractiveness on a global stage, if you consider inbound FinTech activity from global FinTechs into the UK, what attributes do you think the UK FinTech sector are most appealing to global FinTech businesses and then what learnings can the UK take from other global hubs in order to enhance and improve our attractiveness?
Yes. I think that obviously we look from outside in and we’re setting up and establishing in the UK, so we’ve done quite a big assessment of the advantages of the UK. To be quite blunt and pragmatic and to the point, I think the main key strength of the UK is access to a very deep pool of capital and I think that capital has got a lot of experience and understanding of the FinTech and technology sector. So capital is a key thing. I think then it’s clients and it’s revenue and it’s cash flow from those clients.
So in Asia we have a running joke, which is that when we talk to people in global institutions, everybody has a boss and usually that boss is in London and therefore a lot of activity and marketing activity is done in London because of clients. So access to capital and clients, which is the lifeblood of companies, is very key. That said, I think there are other progressive centres out there and there’s a structural point that I think the UK needs to look at within its strategy of building out the ecosystem and that is that at the moment it’s very reliant on post-spending support, so tax credits and things like that.
So we’re in the business of doing things like R&D, inventing new things, and also working with clients on quite big change programmes, commonly called proof-of-concepts, POCs. What happens is certain other centres… I’ll bring up Asia as an example. There is pre-programmed funding available and pre-programmed funding is very important. So if we take an R&D example, then what I’d have to do in a UK scenario right now is probably have to capitalise that R&D spending.
So to capitalise that, I would probably have to sell part of my company in terms of capital-raising to be able to do that upfront R&D to company-fund a strategy of the government to progress and invent new things in the AI space. For me, that means that I become this conduit as a company to just transfer capital onto a government strategy structurally. What I’d like to do is say, why can’t we do that upfront?
Therefore, I don’t just become a conduit because the person who benefits in that out of those people, the capital, the company, and the government strategy… It’s too biased towards the capital benefiting rather than the company being incentivised to then provide more and collaborate onto the government strategy. Then in terms of… If we go to POCs or this proof of concept, a lot of companies and clients that we talk to… They want to do this sort of thing.
Because they’re a bit nervous of this big change, they want to do smaller, little experiments which are going to have very limited and low probability of success because they’re short-term and they’re quite contained, but what we’ve seen in Singapore where there’s some upfront funding with, say, things like the AIDA Grant where what they’ll do is fund some large corporations or corporations that want to change but in the longer frame, in the more strategic framework.
They have to show, the whites of their eyes, that they really want to change and they want to demonstrate that the programmes are really valid, but the government there take the view that the future value of doing that transformation with the companies over a longer frame is much more beneficial than the present value up from funding. I think these kind of structural pieces are something that needs to be built into the armoury of the UK FinTech system because then we would create R&D, we would create more proof-of-concepts, and the actual pragmatic nature of change starts to occur quicker.
Thanks, Luke. Charlotte, perhaps building on that, you have a great macro, bird’s-eye view of the UK FinTech sector. What do you think the FinTech sector could do to increase its attractiveness on a global stage both in terms of inbound and outbound FinTech activity?
Thank you. It’s quite clear that the UK is incredibly good at innovation and incubation. We see so many companies across tech and Fintech starting here and growing their companies, but we are quite a small country. As one investor said, what’s your proof that you can start a company here but then you can take it to a global company? That’s really important, for us to prove that we can do that because if we can’t, we’re always going to be limited on the UK market. As Luke was saying, we are sitting in the epicentre.
We have an incredible time zone advantage. We have English law, which is incredibly well respected around the world, and people do look to the UK for that innovation and certainly within the FinTech sector that has happened, but we shouldn’t be shy on how we can progress, how we can push ourselves, and how we can look at those overseas markets and what they’ve done to support their companies. I sometimes find that we’re good at supporting the ones who start here and who have taken their own risks themselves. Maybe we could do more at attracting companies to come to the UK.
We’ve seen some starts of that with the FinTech bridges that have been built in association with industry, with regulators, and government. That’s a good example of what can be leveraged, but it’s still quite early days for those. I’ve been encouraged by some of the cohorts that have been coming across those bridges, but I think now is the time to take that step back, look at those overseas markets, look at what’s best in class, perhaps it is in Singapore, perhaps it is in the US and Canada, but also look to emerging markets, of what they’ve done, taking the technology into fin rather than the fin into tech, and ensuring that actually we are taking the best in class of those markets and learning from that and pushing ourselves to drive more.
I think there is still a consideration that the UK does not have the ability to bring the growth capital or scaling capital into companies that are based here or who choose to come here and grow and I think that’s something we have to do more on, looking potentially at defined contribution pensions, whether we can get them to invest in some of these [unclear] companies, but also not being shy of going to overseas funds and attracting them into the UK.
It has still been a well-trodden path for some of the tech firms, certainly in my capital markets days back at the end of the 90s, where tech companies would go to the US to IPO and would go to raise significant amounts of money. There’s no reason why we can’t push ourselves to be that capital market that produces companies that can then attract investment from wherever it is but particularly UK patient capital and become global FinTech leaders that stay here and grow here but have that ability to export.
I think that is incredibly important. Certainly most people would say that the UK has done an incredible job in its leadership and its regulatory support of the sector, but that won’t be enough as other markets become more competitive and we’re going to have to push ourselves to look to those overseas markets and look at what needs to be changed, maybe from decades of not changing it, and saying, how do we use this sector to learn and then take that to a global scale? I think that’s where the real opportunity is.
Great. Thank you, everyone. I hope you’ll all agree that it’s been a really insightful discussion with a real mix of perspectives. Some of the key things that I’ve taken away from it are… Firstly, Seema said that whilst COVID presents extraordinary challenges, particularly for global mobility and talent, it also presents an opportunity down the track to consider how immigration frameworks can work better for high-growth FinTechs and actually accelerate change.
At the same time on the domestic talent front there is scope to enhance our domestic talent pipeline by having a national talent strategy as Charlotte mentioned and increasing talent supply across broader financial services. That really requires us to think and understand the current and future skills gaps and collaborate with the education sector more broadly. Thirdly, as Luke said, the UK is attractive to global FinTechs, particularly for its deep pool of capital and potential clients, but other global centres including those in Asia-Pac, I think Luke mentioned Singapore and Hong Kong, are increasingly progressive on those fronts.
So more is needed for us to stay ahead on a global stage. I guess finally, as raised by Charlotte, the UK could benefit from a targeted approach to supporting inbound and outbound FinTech activity and that’s going to require us to build on those existing bilateral arrangements as well as showcase our success, attract global capital, and consider how to really support FinTechs as they expand into new markets.
I’d like to say thank you to Luke, Charlotte, and Seema for taking the time to share their insights today. Listeners, we hope you’ve enjoyed this podcast. Please look out for other episodes in this series and the full report, which will be published later date.
Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.