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Hopes pinned on tech sector riding to London’s rescue in post-Brexit world

Traffic passes around the Old Street roundabout, also referred to as 'Silicon Roundabout,' in the area known as 'Tech City' in London, U.K.
Chris Ratcliffe | Bloomberg | Getty Images

Fears about the fallout for London's financial services industry in a post-Brexit world have caused some to turn to the tech sector as a possible savior.

The number of people working in the technology, media and telecommunications (TMT) sector has been increasing since 2013 and been the largest source of the capital's office demand for the past six years, according to a report out from real estate agency Knight Frank on Thursday.

The agency contends that if the TMT sector was to maintain its average growth rate for the next three years, it would be sufficient to offset as much as a 15 percent drop in the post-Brexit financial services sector's staff numbers.

Fears have been rising that, once the U.K. leaves the European Union and thereby loses its open access to Europe's markets, there will be an exodus of banks and financial services companies out of London.

FinTech (financial technology) is an industry highlighted as a key potential source of growth for London, with the report's authors stressing the benefits for its firms to be located near to established financial sector firms within the City of London.

Yet the threat posed by the U.K.'s impending exit from the European Union (EU) to all sectors which rely on talented employees who are often drawn to London from overseas is acknowledged in the report.

"The political pressure to cut immigration is high, and this is probably the main risk facing the London economy," writes James Robert's, chief economist at Knight Frank.

Indeed, for FinTech firms, the challenges raised by the looming Brexit process are already being felt.

London is still extremely attractive with one of the world's strongest FinTech ecosystems and an unparalleled talent pool, says Emmanuel Lumineau, founder of real estate online financial marketplace, BrickVest and Goldman Sachs alumnus, however Brexit has increased recruitment challenges for his company.

"Our industry relies heavily on talent with a creative and global mind and Brexit has exacerbated the challenges for U.K. companies to obtain visas or even provide visibility for such talent to come and invest their future in the country," he explained.

"The lack of support for visas, the uncertainties around the status of EU citizens post-Brexit coupled with London's high cost of living has become a real repellent for hiring international talents since last June's vote," Lumineau added.

These sentiments were echoed by Lawrence Wintermeyer, chief executive officer of Innovate Finance, the independent not-for-profit association representing the U.K.'s global FinTech community, who also spoke to broader the effects of the Brexit vote on the sector.

"Venture investment into U.K. FinTech slowed in 2016 which many in the community attribute to the uncertainty of Brexit. Leaving the single market will have a material impact on FinTechs delivering European cross border payments but many other FinTechs will remain largely unaffected," he began.

"The number one issue for Innovate Finance FinTech members is the ability to hire global talent which many fear will be impacted by a hard Brexit… We will look to the U.K. Government to provide clarity on how UK FinTech can continue to attract global talent and scale across Europe," Wintermeyer concluded.

Yet Knight Frank's Roberts suggests a scheme similar to those used by some of the U.K.'s continental cousins may offer guidance for a possible partial solution for the county's capital once it leaves the trading bloc.

"In part we expect the allocation of work visas post-Brexit to be heavily biased towards skilled workers, which should ease the impact on London's economy. Moreover, there has been discussion of a 'London visa'. This is inspired by similar schemes in Australia and Canada, where it is possible to grant immigration visas to live in a specific area of a country," explained the economist.

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