Cardiff and South Wales are well positioned to harness the potential of its emerging fintech sector, said Treasury Secretary John Glen, but said a planned £ 1bn growth fund to support the sector across the UK should not have an element earmarked for Welsh businesses.
Mr Glen was speaking during a visit to Cardiff where he met the first cohort of the Wales Foundry Fintech Accelerator Program. Although not a UK government initiative, he has a UK-wide mandate for financial support and is also Minister for the City of London.
The recent Kalifa Industry Review, conducted by former Wordplay Managing Director Ron Kalifa and commissioned by Chancellor Rishi Sunak, identified Cardiff and South Wales among the 10 fintech clusters across the UK with the potential stimulate economic recovery and create a new wave of highly skilled and well-paid jobs.
Mr Glen said: “Fintech is a great success and we definitely have a strong hub in Cardiff and South Wales.
And what it’s about (acceleration program) is bringing together companies that have huge potential. I met about eight companies as part of the 12 week program, which will basically help them define their way forward in terms of funding and developing their proposals and how they are going to develop this technology and actually grow their business.
He said the UK government is currently working on implementing the recommendations of the Kalifa report.
This includes setting up a £ 1billion fintech growth fund to fund companies’ growth plans. The fund will be financed by institutional capital.
Mr Glen said he did not think an item should be effectively ‘barnetized’ to support business in Wales.
He added: ‘This fund represents £ 1 billion from the private sector, so there would be limited room for maneuver for us in terms of cantonment. What is clear from my conversations (with finetch companies in Wales) is that a lot of them come from different places and backgrounds, some in consulting and insurance etc. of the proposal to facilitate this route to a conversation with a VC (venture capitalist), angel investor or bank. So the notion of cantonment is one that we always think we are looking at carefully, but in reality what we really want is the acceleration of the business proposition that will attract the money.
“It’s also about jobs. It’s the big opportunity and there are 16,000 jobs here in Cardiff and South Wales in fintech and it’s about bringing ambition and success from Silicon Valley to the Welsh valleys. There is huge potential for growth in Cardiff and South Wales which has been a great achievement, and we are going to support that and I hope we have the cohort as well here to London in six months. ”
On the UK government’s £ 1billion Future Fund, one of its responses to supporting businesses in the pandemic, the majority of equity debt financing has gone to tech companies in London and across the country. the south-east of England. One of the criteria was that companies had to have previously raised £ 250,000 in a fundraising round. Funding rounds for tech start-ups in other parts of the UK, such as Wales, at this level are less frequent.
Some 606 companies in London (out of a UK total of just over 1,000) shared around 64% of the total funding to £ 646.8million. Adding the South East of England, the number of funded companies was 728, which received total funding of £ 777million.
In Wales, 16 companies received support worth a total of £ 8.7million. Recipients include Monmoutshire-based Riversimple, which is looking to move to mass production for its hydrogen fuel cell vehicles, and Carmarthenshire-based cleantech company Hydro Industries.
Mr Glen disagreed that the fund should have sought to reduce the amount of the previous round of funding required for businesses outside London and the South East.
The Minister said: “We have thought long and hard about how we are going to proceed (Future Fund). We had to intervene quickly because we were facing a liquidity deficit in the market at the time. And we had to balance the proposition of people almost automatically accessing money with criteria where there was reasonable assurance as to the level of maturity of those companies. So we set that benchmark against the previous funding, and we think it’s been quite successful and a number of companies have done well. So you need to see it through the prism of any emergency response to deal with a liquidity gap in times of crisis. It was never going to be a one-size-fits-all solution. What was important was to protect as many jobs as possible.
The UK government is now considering setting up a successor fund.