22nd November 2023
Summary analysis
Today the UK Chancellor of the Exchequer, Jeremy Hunt, set out updated tax and spending plans in the Autumn Statement.
The Chancellor declared it an “Autumn Statement for growth”, with 110 measures to boost the economy. The headline announcements focused on tax cuts, with the Chancellor announcing a series of tax cuts to businesses and individuals. Meanwhile, the Office for Budget Responsibility (OBR) has downgraded its growth expectations for the UK economy for the next three years.
For FinTechs, the Government also published the Future of Payments Review by Joe Garner alongside the Autumn Statement. The Government has confirmed it will take forward one of the main recommendations to develop a National Payments Vision, to be launched in 2024. The Government also confirmed its intention to seek to “legislate to unlock the full potential of Open Banking-enabled payments” next year. From a regulatory perspective, the Review also calls on HM Treasury and regulators to consider if certain regulatory requirements are applied to payment firms in a clear and appropriate way.
The Chancellor also announced plans to continue the progress of the Mansion House Compact reforms, with new measures aimed at supporting high-growth innovative technology companies. Innovate Finance has been closely involved in, and supportive of, the Mansion House Compact, recognising our high-growth members’ need for growth capital, and we welcome these new initiatives (more details below).
The macro-economic headlines
The Office for Budget Responsibility has updated its economic and fiscal outlook and revealed a downgraded growth forecast from that shared at the Spring Budget.
- The UK economy has grown and will continue to do so, but slower than previously expected: The UK economy is set to grow by 0.6% this year. This beats the OBR forecast in March, which predicted the economy would contract 0.2% in 2023. Latest forecasts show the economy will grow by 0.7% next year and 1.4% in 2025, lower than previous OBR forecasts.
- Headline inflation has halved: It will continue to do so as it is forecast to fall to 2.8% by the end of 2024, before falling to the 2% target in 2025. CPI Inflation remains stubborn at 7.5%, but is expected to halve to 3.6% in 2024.
- National debt is expected to fall: At the last Autumn Statement, debt was forecast to hit almost 100% of GDP by the end of the five year forecast period. Headline debt is now predicted to be 94% of GDP by the end of 2028. The Government is forecast to meet its fiscal target to have underlying debt falling as a percentage of GDP in the final year of the forecast.
Table of OBR UK economic forecasts (%):
Key points for FinTech:
1. Growth capital
Yesterday, ahead of the Autumn Statement, the Chancellor announced progress in the Government’s support for the Mansion House Compact, which seeks to support high-growth innovative technology companies in the UK that often struggle to obtain the scale up capital they need to reach their potential. The Chancellor announced two initiatives, both to be managed by the British Business Bank (BBB). The BBB is moving into discussions with two parties who are proposing to create two new investment vehicles that are accessible to private capital, including substantial DC pension scheme capital, to support innovative companies in the UK. The BBB will also establish an investment vehicle utilising its position as the largest domestic investor in UK venture capital, opening its capability and investment pipeline to pension capital.
2. Future of Payments Review
The government has published Joe Garner’s review of how to deliver world-leading payments journeys for UK companies, committing to legislate to unlock the full potential of Open Banking-enabled payments. The new regulatory framework will require firms beyond the largest banks to participate in a sustainable and equitable commercial model through which the technology and necessary consumer protections will be developed, and with appropriate regulatory backstops. The report also recommends prioritising addressing basic levels of consumer protection and clarity on liability for Open Banking payments, while urging the government to deliver the regulatory framework for Open Banking rapidly. The government will also publish a National Payments Vision in 2024.
On fraud, the report recommends that authorities should increase their focus on preventing fraud in the first instance and closely assess the impact of Payment Systems Regulator (PSR) mandatory reimbursement rules for authorised push payment fraud. The report recommends that the PSR conducts a review of reimbursement rules 12 months after implementation (with an emphasis on additional payments friction), and that the government should set a more ambitious fraud crime reduction target beyond 2024 with prevention at the heart of it.
In terms of FinTech and regulation more broadly, the report proposes that HM Treasury and regulators review whether the way some current regulatory requirements are applied to FinTechs is clear and appropriate. The goal should be to reduce complexity for smaller firms. The report also calls for closer alignment of regulatory activities to increase firms’ capacity to innovate. Actions from the Kalifa Review (of which Innovate Finance was co-secretariat) must remain a priority.
We aim to provide a more in-depth, separate analysis on the report in due course.
3. Prospectus reform
The government will lay legislation to replace the retained EU law prospectus regime with a new framework tailored to the UK. The government states this will create a more agile and simplified regime, helping to widen participation in the ownership of public companies, simplify the capital-raising process for companies on UK markets, and make the UK a more attractive listing destination.
4. Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT)
The government confirmed it will legislate to extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) to 2035 to continue supporting thousands of start-ups and small and medium-sized enterprises (SME) each year who face the biggest challenges in accessing growth capital. Innovate Finance has previously called for these schemes to be extended given their importance to start-up capital in the UK.
5. Foreign direct investment
The government has published the recommendations and its response to the review into attracting foreign direct investment, led by Lord Harrington. The government has confirmed it will set up a new Ministerial Investment Group tasked with driving inward investment, and will focus on five priority growth sectors, including digital technology. Innovate Finance is a strong advocate for investment into UK FinTech and welcomes this initiative
6. Digital Securities Sandbox
The Government has confirmed its final approach to implementing the Digital Securities Sandbox (DSS), which will facilitate the adoption of digital assets across financial markets. The Government will also lay a Statutory Instrument to implement the DSS. Innovate Finance is very supportive of the DSS.
7. Artificial intelligence (AI)
The Chancellor noted the UK is currently the third largest tech sector in the world and that AI will be at the forefront of growth. He added it is crucial that universities, scientists and start-ups are able to access AI. Based on the success of supercomputing centres in Edinburgh and Bristol, the government will invest £500 million over the next two years to fund innovation centres to make the UK an AI powerhouse.
…Other news in FinTech Policy you may have missed since our last newsletter
Financial Promotion Exemption consultation response document
Commons Education Committe’s Inquiry into financial education
Got views? Get in touch
The team wants to hear from members, stakeholders, and wider networks across civil society regarding these critical areas. If you have views or concerns, please feel free to email us with your thoughts at policy@innovatefinance.com
Innovate Finance policy team:
Adam Jackson - Director of Policy
Paul Worthington - Head of Regulatory Affairs
Mike Carter - Senior Policy Advisor
Megan Jenkins - Policy and Public Affairs Manager
Christopher Foo - Policy Associate
Jago Corry - Policy Associate
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