The Labour Party’s landslide victory in the UK general election last week ousted the Conservatives from office, replacing Prime Minister Rishi Sunak with Keir Starmer. However, while Labour won a majority of seats in the House, the Conservatives retained 121 and other major parties, including the Green Party, Reform UK and the Liberal Democrats, won seats in parliament. There were also significant victories for independent candidates, such as Jeremy Corbyn in Islington North.

In his first speech as prime minister, Starmer promised the British public “a decade of national renewal,” signaling a complete reset of the country’s policies. The question remains: what do these changes in parliament mean for the future of fintech in the UK?

AS outlined in their manifestoThe Labour Party has pledged to promote innovation in the fintech sector, expand the British Business Bank, speed up regulatory processes and develop a new anti-fraud strategy.

Growth and SMEs

On innovation, the Labour Party has underlined its commitment to supporting the growth of financial technology and maintaining the UK as a global financial hub.

Sara Brigden, managing director of R&D tax consultancy ForrestBrown, said: “Following Labour’s election victory, the spotlight will be on the new government’s ability to deliver on its manifesto commitments. An industrial strategy with innovation at its heart will be key to delivering the new Prime Minister’s promised ‘era of national renewal’.”

He explained how the new government should set targets for investment in research and development to attract long-term funding.

Brigden concluded: “With the right regulatory framework, business innovation can play a critical role in achieving the government’s goal of boosting economic growth.”

Dan McLoughlin, fraud and security specialist at Lynx, said: “The new Labour government must focus on three key areas: maintaining the UK’s financial sector’s global leadership; ensuring our regulations remain relevant domestically and globally; and driving growth in our financial and fintech sectors.

He said Labour’s positive outlook on AI development, the expansion of open banking and open finance point to a growth path for the future of fintech in the UK. However, there needs to be a clear strategy in place when it comes to the development of generative AI (GenAI) technologies.

A key part of the UK financial sector are SMEs, and their output can actually boost the economy and in turn contribute to jobs and innovation. Industry voices have expressed that the new government needs to provide greater clarity on how it intends to support SMEs during their time in office.

Theo Chatha, finance director of Bibby Financial Services, said SMEs must be prioritised under the new government. Commenting on Labour’s promise to expand the British Business Bank to increase access to capital for SMEs, Chatha said:

“We were encouraged to see the Labour Party commit to strengthening the British Business Bank’s Bank Referral Scheme in January. But clearly, there is still much to be done to make it work effectively. Despite the great efforts of the British Business Bank and the platforms and nominated funders, the number of businesses the scheme has supported since its launch in 2016 has been hugely disappointing.”

Sinead McHale, CEO of Lloyds-backed Satago, added: “Despite recent signs of easing inflation, business costs remain elevated. SMEs continue to face challenges with profitability and long-term growth plans, with limited access to finance and persistent payment delays from larger firms.

“New policies need to be implemented to further support SMEs, such as tougher penalties for late payments by larger companies and incentives for timely payment practices. Meanwhile, greater collaboration between fintechs and banks will help SMEs adopt more sustainable cash flow management practices.

Commenting on the growth from a cloud perspective, Civo CEO Mark Boost said: “I hope Labour will bring a fresh perspective to the UK cloud market, with a stronger focus on truly sovereign cloud providers. For too long, the government has prioritised big US tech companies over our UK sovereign capabilities. This needs to change so we can have a stronger, more robust UK economy that is not dependent on giant hyperscale companies that don’t have the UK’s best interests at heart.

Regulation

The financial sector is clamoring for faster and more effective regulation. There is a flurry of new regulatory frameworks coming into play in the EU and the UK, such as the Third Payments Services Directive (PSD3) and the new Payments System Regulator (PSR) legislation.

IDEE CEO Al Lakhani stressed that the Labour Party must outline a more effective cybersecurity strategy, saying: “The Electoral Commission: hacked. NHS hospitals: hacked. Countless UK businesses: hacked. How many attacks are too many? With the Labour Party coming to power for the first time in fourteen years, a comprehensive strategy to strengthen the UK’s cyber defences is urgently needed. The EU is implementing the NIS2 directive, why is the UK lagging behind in securing its digital infrastructure? It’s time for the government to wake up, smell the coffee and develop a plan to change that.”

McLoughlin added: “There was no mention in the Labour manifesto of interfering with existing or proposed regulations, so we can expect the PSR regulations tackling Authorised Push Payment Fraud (APPF), coming in October, to come into force anyway. This is crucial, as this legislation is being watched closely by authorities around the world. It could be a catalyst for global convergence of fraud prevention and anti-money laundering, as well as highlighting the scale of the problem of money mules, who are funding organised crime around the world.

“The industry will be closely watching the Labour Party’s moves as it asserts itself in parliament, particularly its proposal for a more collaborative relationship with the EU. This could lead to compliance with the EU’s PSD3 becoming mandatory in UK regulation. Either way, UK fintechs would need to ensure compliance with this regulation if they wish to operate within the EU.”

Magali Van Bulck, head of government relations at Wise, said hidden fees were a devastating loss for UK consumers and that the government must take a stand against them to protect citizens.

He noted: “As a matter of urgency, we encourage the newly elected Government to complete the review of the Payment Services Regulations and make the rules fit for purpose. It is time to close the loopholes that defraud consumers and businesses. Everyone should know how much they pay.”

National Wealth Fund