Was Reeves’ Spending Review a fintech endorsement?
Rachel Reeves has promised to back UK fintech and in Labour’s inaugural Spending Review, she piled billions into the tech sector.
The Chancellor handed the Department for Science, Innovation and Technology (DSIT) a hefty £16.5bn budget as she took the chop to other departments.
DSIT’s expenditure limit is set to grow 7.4 per cent by the end of the parliament, meanwhile, the likes of the Department for Transport is facing a five per cent squeeze, excluding depreciation.
The government also doubled down on its AI ambitions with £2bn earmarked for the AI Action Plan, overseen by tech secretary Peter Kyle.
The scheme looks to expand AI infrastructure and appoint an ‘AI Sector Champion’ in key industries including financial services.
Janine Hirt, chief executive of fintech’s industry body Innovate Finance, welcomed the AI commitment, adding “the fintech industry will no doubt play the leading role in diffusing this technology across financial services.”
Financial services companies have already begun to leverage the agility of fintech firms.
AI fintech Aveni last month launched its first iteration of FinLLM – an AI model that has been trained to understand and work with financial language, regulations and tasks relevant to the UK financial service sector.
The firm collaborated with Lloyds Banking Group and Nationwide on the tech after the firms participated in a Series A funding round for the fintech which topped £11m last year.
Banking on fintech
Innovate Finance listed the expansion of the British Business Bank’s financial capacity as a key policy win.
Reeves increased the bank’s overall funding and investment capabilities to £25.6bn, enabling a two-thirds increase in investments to around £2.5bn each year.
Hirt said the increase would help “address the under-investment in British start-up and scale-up fintechs”.
Fintech investment in the UK dwarfs that of its European peers, with the country’s 2024 figures second only to the US at $3.6bn.
But this marked a 37 per cent decline from the previous. The fall outpaced the 20 per cent drop in global investment to $43.5bn.
The British Business Bank has a network of over 200 delivery partners, including fintech providers.
The bank’s fintech investments date back to 2013 and topped $280m ahead of March 2024.
A fraud-shaped hole
Concerns were raised about the lack of funding to support the government’s fraud strategy.
As with dispersion of AI, fintechs play a crucial role in the fight against fraud.
UK Finance’s annual fraud report revealed criminals stole £1.17bn in 2024, as online scams ramped up to 70 per cent of total cases.
The Home Office is set for a 1.7 per cent spending cut per year, which raised questions about how the figures will add up alongside an increase to police funding and border control.
Hirt said: “We call on the government to ensure that sufficient resources are available to tackle fraud and economic crime.
“In addition to extra police resources and funding for tackling serious and complex fraud announced today, the Home Office must have sufficient funding to build a cross-industry data sharing platform to block and disrupt fraud online as part of its new Fraud Strategy.”
Fintech’s judgement day looms
Whilst Hirt branded the Spending Review as a “clear commitment” to innovation, fintech’s determining moment will come when the Chancellor delivers her industrial strategy next month.
First announced at Innovate Finance’s global summit, Reeves will publish her Financial Services Growth and Competitiveness Strategy on 15 July alongside her Mansion House address.
Fintech leaders were invited to a summit with the Treasury earlier this year, with reports they were told to come “armed with ideas about how to improve UK competitiveness”.
The talks made up a series of meetings held by the Chancellor as she sought to generate growth ideas to feed into the strategy.
Top bosses at UK fintech firms told CityAM earlier this year the Chancellor could not take “fintech’s success for granted” ahead of the strategy.
Reeves had told leaders she would make the UK the best place to “start up, scale up and to list”.
For the fintech industry, a full endorsement may only arrive when – and if – policy lands on 15 July.