Rishi Sunak review moots £1bn fintech growth fund

Institutions would own £1bn fintech growth fund, which would take stakes in fast-growing financial technology companies

UPDATED: A Treasury-commissioned review is to set out a five-pronged strategy for a ‘big bang’ in the financial technology sector, including a £1bn fintech growth fund.

The growth fund could be backed by pension funds and would allow fintech start-ups to grow independently rather than being taken over by rivals, reports the Times.

Rishi Sunak, the chancellor, asked Ron Kalifa, the former boss of payments processor Worldpay, to look at how fintech can prosper as the City diverges from the EU.

Another proposal is to create ten ‘clusters’ around the UK to act as hubs for innovation. The clusters are designed to make sure that the industry isn’t overly concentrated in London, and they could receive funding from local enterprise partnerships, which link local authorities and local businesses.

Proposed locations for these clusters include the Glasgow-Edinburgh corridor and Wales, where Moneysupermarket and Admiral have operations.

Kalifa’s report is expected to be delivered to Sunak as soon as this week. He has devised his strategy following a detailed consultation with big players in the sector.

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Fintech is estimated to be worth £7bn as a sector and employs 60,000 people in Britain.

The report will also recommend special visas for tech workers who want to work in Britain. One of the sector’s biggest fears over Brexit was cutting off the flow of workers from the EU coming to the UK.

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Potential for reforming the listing rules on the London Stock Exchange is expected to be outlined in Kalifa’s report. One of its ideas is more use of dual-class share structures, favoured by entrepreneurs, as they give them more influence than the ‘one share, one vote’ system preferred by investors in Britain.

£300m SME investment fund

Meanwhile, according to Sky News, the London Stock Exchange is putting together a £300m fund to invest in companies battered by the pandemic.

David Schwimmer, the London Stock Exchange Group (LSEG) chief executive, has been talking to influential City figures and the Treasury about a UK Growth and Resilience Fund.

According to one Sky News source, BMO Financial Group, JP Morgan Asset Management and Octopus Ventures would oversee the three strands of investment, focused on private equity, listed small-cap companies and venture capital respectively.

It would initially aim to raise £300m but could be expanded to £1bn, this fund manager told Sky.

One idea is that big businesses that have done well out of the pandemic, such as supermarkets and online retailers, would stump up the seed funding for an initial public offering (IPO) of the investment trust.

Further reading

British tech firms raise record £11bn in venture capital funding last year