The pipeline of start-up banks and other financial firms looking to set up in the UK following the EU referendum vote is showing no sign of slowing down, according to the specialist PwC practice working with potential market entrants.
9 in 10 of the PwC ‘s Authorisation and Start up Unit’s clients that were planning to set up a new financial services firm before last Thursday’s referendum are still committed to setting up their businesses in the UK, PwC has found.
Given the attractive returns achieved in the retail banking sector, the strategic direction of some incumbent global investment banks in particular, and the ongoing innovation in technology, PwC expects to see continued growth in new entrants that will focus on particular market sectors.
“We are working with approximately 20 prospective new banks and other large FS businesses looking to set up in the UK.” said Stephen Morse, financial services partner at PwC. “They are a mixture of domestic UK businesses, EU-based individuals and businesses and those from around the world including from China, Turkey, Japan, South Africa, Asia and the Americas.
“What is striking is the variety of new businesses that are applying for UK licenses is not just limited to “mainstream” retail challenger banks, mortgage lenders and asset managers. There are a range of new technology-enabled banks, fintech businesses, commercial banks and even niche investment banks who have identified gaps in the market in part caused by big global banks having pulled out of some businesses over the past few years.”
This positive sentiment can be put down to a combination of key factors: a widely held view that the UK is a market which embraces innovation that has a progressive regulatory regime, a well-established and sophisticated financial system allied to a highly skilled and experienced workforce.
Stephen Morse, financial services partner at PwC, added:
“All of these firms have a well-researched idea of the market opportunity, a clear strategy to engage the regulators’ hearts and minds, an understanding that they need to have the right tax and legal arrangements in place, and a proper plan for how to both ‘build’ and ‘run’ the bank in a sustainable, scaleable and cost-efficient way.”
Investors
Positive sentiment towards these new businesses also appears to be flowing through to potential investors. Similarly to the diversity in the banks and financial firms themselves, the potential investors and backers come from the UK and a variety of EU and non-EU countries. The scale of potential investment is significant: PwC has estimated that the total capital already committed exceeds £200m, with total capital and funding of approximately half a billion pounds featuring in their clients’ business plans.
Andrew Kail, UK head of financial services at PwC, said: “There remains a wide range of potential investors and backers for these new market entrants, not only from the more traditional type of equity investor, but also from new investors who are looking at providing debt funding.
“Potential investors remain willing to look carefully at well thought through and presented market analyses, business plans and projected returns. However there remains a real emphasis on high-quality applicants, and a clear focus on having the right strategy for negotiating price and terms with potential investors and backers.”
