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FinTech provides ray of light for financial directors fearing profits squeeze

Financial Directors at the UK’s top 100 law firms are backing London’s thriving FinTech scene to provide a boon as Brexit uncertainty puts the brakes on mergers and acquisitions work.

The findings, which are part of a report by Thomson Reuters Legal, found widespread uncertainty amongst Financial Directors who fear that economic and business pressures in the sector will drive down profit margins at some of the country’s biggest solicitors.

According to the findings, 24% of those surveyed were fearful that a decline in mergers and acquisitions would squeeze profits, while nearly three quarters felt that an increasingly competitive environment is placing downward pressure on fees which in turn could harm profitability at their respective firms.

However, one area that is singled out as providing ray of light to the UK’s law firms London’s booming tech sector, in particular its world-leading FinTech scene, with 28% of respondents predicted that it would be the fastest growing area this year.

Commenting on the figures, Samantha Steer, director, large law segment for Thomson Reuters UK&I Legal, said: “The technology industry in particular has seen massive investment in recent years which has propelled growth in the UK and we expect this trend to continue into the long-term.

“London-based fintech startups have seen high levels of private equity investment flooding in which has helped to stimulate corporate activity whilst also cementing the city’s position as a leading fintech hub.”

The figures highlight the ripple effect that the capital’s thriving FinTech scene is having across other sectors across the UK with law firms enjoying the fruits of funding deals, investment and regulatory work.

However, Marta Krupinska General Manager and Co-Founder of fintech startup Azimo, has cautioned that, while the survey highlights the growing importance of the sector to the UK economy, FinTech’s continued success is reliant on continued access to the European single market.

Ms Krupinska added that the outcome of the impending Brexit negotiations would have a crucial impact on whether London can maintain its position as one of the world’s FinTech hotbeds, and singled out passporting and freedom of movement as two benefits that need to be safeguarded.

She said: “ Many companies here depend on both EU market access and the ability and legal right to passport their services to the rest of Europe. Migration will also be a vital factor for fintech, as the industry has depended on the immigration of highly skilled workers, and many start-up firms like Azimo are founded or co-founded by migrants.

“If the freedom of movement and ability to passport services is affected, fintech will undoubtedly suffer.”