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City urged to offer controversial dual share listings to help UK keep its fintech crown

Rishi Sunak has been handed a list of key requirements to keep financial technology flourishing in the UK - The Telegraph
Rishi Sunak has been handed a list of key requirements to keep financial technology flourishing in the UK - The Telegraph

Rishi Sunak is considering plans to introduce controversial new share rules which will give tech founders more power, in a bid to prevent rivals stealing the City's prized crown in financial technology.

The dual share structure proposal is a key recommendation unveiled today in a review of the so-called fintech industry which the Chancellor commissioned himself.

Other suggested changes include a tweak to regulations so that pension companies can invest more easily in tech firms, and creating a new visa for highly skilled IT experts.

The Chancellor is finalising plans for next week's Budget and proposals from the report could be included alongside a mooted hike to corporation tax.

Dual share structures allow founders to retain control over their businesses after they have floated. The review, which was carried out by former Worldpay boss Ron Kalifa, said they should be allowed on the London Stock Exchange to stop digital banking companies such as Monzo and Revolut from floating in New York.

The proposals are contentious because they mean ordinary shareholders have less power than a founder even if they own more stock, and it is feared any change could give over-mighty entrepreneurs too much control. But Mr Kalifa said alterations are crucial to prevent rivals from catching up with London's burgeoning fintech scene.

He said: “Others are waiting for our crown to slip."

Fintech has become the dominant industry in British start-ups, with companies in the market generating £11bn in revenues in 2019.

Significant funding rounds from digital banks such as Monzo, Revolut and Starling Bank pushed investment in financial technology businesses in the UK up to $4.1bn (£2.9bn) in 2020, more than the next five European countries combined.

The review found that financial technology start-ups will grow to be worth £24bn in gross value to the country by 2030. But the continued emergence of rival technology hubs overseas means Britain must act to keep this pole position.

Mr Kalifa said: “We need to make sure that we maintain our momentum and invest in it so that it remains a significant force for the future."

“We don't have a start-up problem within the UK.

“Where we have a problem is the opportunity for businesses to scale up and I'm keen that those businesses that do scale up stay in London.”

Financial technology in the UK faces key three threats, the review found: International competition from rival countries such as Singapore and Australia; the impact of Brexit; and continued disruption caused by the coronavirus pandemic.

The Government should work with start-ups to ease regulations and create a new visa system to ensure they can hire top talent, the review said. Growing businesses such as Monzo and Revolut should also be able to offer work placements to students, it added.

Mr Kalifa also called in his review for the creation of a new £1bn Fintech Growth Fund modelled on the existing Business Growth Fund.

The Government should help to encourage pension funds and insurers to contribute funding designed to support promising digital banking start-ups, he added.

The London fintech scene
The London fintech scene

There have been concerns that £1bn won’t be enough capital to keep British start-ups from looking overseas for investment.

Mr Kalifa said: “You've got to remember there's £6 trillion in UK pension schemes alone.

“So pushing that to high growth technologies like fintech makes complete sense.”

Digital banks in the UK have sought overseas capital from deep-pocketed investors in the US and other countries, with Monzo raising £113m in a round led by US backer Y Combinator's Continuity fund in 2019.

The calls for action in the review have already been backed by experts in the UK’s financial technology industry.

David Brear, chief executive of financial technology consultancy 11:FS, said: “The Kalifa review has done a great job of identifying the traits that led to the UK’s success, and is looking to protect and build on them.

“What made us so special and such a magnet for talent and investment was our incredibly progressive government policy and regulation, through the work the Financial Conduct Authority has spearheaded."

The Treasury declined to comment.

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