Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

A fintech future?

Written by Li-Ann Chin,  associate 
Edited by Adam Shaw, associate partner
13 January 2021

Good morning,

Globally, the UK financial technology sector is widely considered to be a success, with London at the epicentre of innovation. From Revolut to TransferWise and Yolt, the list is endless. According to data from Innovate Finance, the UK fintech sector attracted a record investment of $4.9 billion in 2019, surpassing $3.6 billion in 2018, making it the second biggest fintech market in the world after the US in terms of venture capital investment.

But have we also inadvertently taken Britain’s glittering fintech status for granted? Indeed, there are signs that the UK’s fintech industry is starting to lag behind the likes of Silicon Valley, Singapore and Hong Kong, due to a lack of start-up finance, limited access to scale-up capital and slower regulation.

Brexit uncertainty has dealt a staggering blow to the £7 billion industry. With around 42% of the UK fintech workforce drawn from outside the UK, and two-thirds of that hailing from the EEA, it has raised questions over the contentious issue of immigration and the sector’s ability to attract international talent for the future. In late November last year, it was reported that the rush to draw up Brexit contingency plans created a great deal of “stress” and “nervousness” within the industry.

Led by Ron Kalifa OBE, the former chief executive of Worldpay, the independent Fintech Strategic Review, is set to propose measures to support the UK’s fintech sector and overcome Brexit-related challenges. Recommendations are set to include a tech-specific visa to bring in essential talent for the UK’s most dynamic start-ups, in addition to changes to the listing regime that will ensure the London stock market is seen as more attractive to founders of fast-growing firms. The review, which will be published next month, is also expected to back reducing the minimum stake in a company that has to be floated on the market from 25% to 10%, and to push for mature start-ups to have improved access to institutional investors.

The industry will be watching with anticipation.

News

The UK is reported to be starting trials of a vaccine passport which will see thousands of vaccinated British citizens offered a health passport in the form of a free app. The trial will be overseen by two directors of public health in local authorities and is expected to complete in March.

Tesco, Asda and Waitrose have become the latest supermarkets to say they will deny entry to shoppers who do not wear face masks unless they have a medical exemption. It follows a similar move by Morrisons, while Sainsbury’s has said it will challenge those who flout the rules. Retailers have been criticised for not doing enough to enforce Covid-19 rules as infections spread.

 The São Paulo-based Butantan Institute, which is testing China’s Sinovac Covid-19 vaccine, said on Tuesday that data from late-stage trials revealed it to be 50.37% effective against the virus, almost 30% lower than announced last week, as concerns grow over the study’s transparency. (£)

Free school meal hampers being offered to eligible families by Chartwells, a government contractor, have been branded as “completely unacceptable” due to their poor quality. An urgent investigation has been launched by the minister for children, Vicky Ford.

Business and economy

According to business department and senior industry figures, Kwasi Kwarteng, the UK’s new business secretary, has vowed to prioritise reforming the British audit market, signalling a revival of delayed efforts to shake up the “Big Four” accountancy firms in the coming months. The Institute of Chartered Accountants in England and Wales said on Monday that the government needed to make audit reform “an urgent priority”. (£)

Catherine McGuinness, policy chair at City of London Corporation, has criticised the UK government for taking the financial services sector for granted and overlooking the City of London during the last two years of Brexit negotiations. The UK financial services sector has lost its pre-Brexit level of access to EU markets, with firms instead having to move more than £1 trillion of assets and thousands of jobs to avoid disruption.

The cost of shipping goods from Europe to the UK has risen sharply this year, according to figures from Transporeon. Figures from the transport software provider showed that the average cost of transporting a lorryload of goods to the UK from Germany was 26% higher in the first week of 2021 compared with the average for the third quarter of last year. The higher shipping costs have reportedly arisen from additional paperwork required at the UK border since the Brexit transition period ended at the start of the year. (£)

Mike Pence, the US vice president, has rejected a call from Democrats to invoke the 25th Amendment to oust President Trump over his role in last week’s Capitol riot, setting in motion a House vote today to impeach the president during his final week in office. The move means that Trump will be the first president in history to be impeached twice, this time with the support of some Republicans. (£)

Columns of note

England currently has more than 30,000 patients in hospital with Covid-19, which is 62% higher than during the first peak in April. Writing in The Guardian, Christina Pagel, director of UCL’s Clinical Operational Research Unit, describes what it truly means for a hospital to be overwhelmed. She calls for an increased investment by the government in the NHS, and in pandemic preparedness and preventive public health to ensure a situation like this never repeats itself.

Last week, a pro-Trump mob stormed the US Capitol and livestreamed their actions while the rest of the world watched in utter disbelief. And yet, with conspiracy theories and political extremism flourishing across the continent, Gideon Rachman cautions in the Financial Times that it would be a mistake for Europeans to believe that the absence of a Trump-like figure makes them safe from the political passions engulfing America. (£)

Cartoon source: The New Yorker

Markets

What happened yesterday?

U.S. stocks fluctuated near record highs and benchmark Treasury 10-year note yields rose to a 10-month high as investors mulled the prospects of the economic recovery and vaccine rollout. The S&P 500 closed up 0.04% at 3,801.19, while the Nasdaq rose 0.28% to 13,072.43.

On this side of the Atlantic, the FTSE dipped 0.65% to close at 6754.11.

The pound gained 0.84% against the dollar to $1.3632 and was 0.72% stronger against the euro at €1.3632.

In terms of commodities, silver rose two percent to $25.40 per ounce, its first advance in a week.

In company news:

Ted Baker is reported to have pressured some staff to return to the office during lockdown, despite official government guidance to work from home if possible. Affected staff reportedly work in teams dedicated to design, merchandising, studio, buying and production and store design.

The Hut Group, an e-commerce company, said it now expects revenue for the current year to increase by between 30% and 35%, up from previous guidance of 20% to 25% growth after a strong start to the year.

British Airways is facing the largest group claim over a data breach in UK legal history following a 2018 incident that exposed details of more than 400,000 of its customers. More than 16,000 customers have joined the case ahead of a March deadline to sign up to the action, according to PGMBM, the lead solicitors in the group litigation case.

Moonpig, which sells greeting cards and gifts online, has confirmed it is planning a £1bn listing on the London stock exchange.

What’s happening today?

Interims
Just Eat Takeaw, PageGroup, Persimmon, Sainsbury (J)

AGMs
Ab Dynamics, Octagonal

UK Economic Announcements
(07:00) Index of Services

Int. Economic Announcements
(10:00) Industrial Production (EU), (13:30) Consumer Price Index (US), (15:30) Crude Oil Inventories (US)

Source: Financial Times

did you know

Neil Armstrong’s life insurance would have cost him $50,000 a year on a $17,000 salary, so instead he signed hundreds of autographs before launch day for his family to sell at a premium if he died.

Parliamentary highlights

House of Commons

Oral questions

Women and Equalities (including Topical Questions)

Ten Minute Rule Motion

Covid-19 Financial Assistance (Gaps in Support) – Tracy Brabin

Legislation

Financial Services Bill: Remaining Stages

 Adjournment

Support for small business during the covid-19 outbreak – Christine Jardine

House of Lords 

Oral questions

Number of people from black, Asian and ethnic minority communities participating in COVID-19 vaccine trials – Baroness Lawrence of Clarendon

Impact of household mixing from 23-27 December on COVID-19 infection rates – Lord Scriven

Arrest and transfer of suspects between the EU and the UK – Lord Thomas of Gresford

Legislation

Covert Human Intelligence Sources (Criminal Conduct) Bill – report stage (day 2) – Baroness Williams of Trafford

Scottish Parliament 

Ministerial Statement: Vaccination plan

Ministerial Statement: COVID-19 Education Update

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