Leeds has firmly established its position as one of the UK’s leading fintech hubs with huge growth over the last three years; with its key strengths including banking, lending, payments and financial regulation. However, it doesn’t escape the ongoing battle for talent or the scarcity of fintech-specific funding.
In his independent report on the UK fintech sector in February 2021, Sir Ron Kalifa called Leeds out alongside Manchester (as part of a ‘Pennines Cluster’) as one of the UK’s most established fintech hubs.
Now, a new review has delved further into the Leeds City Region’s fintech sector (which includes Bradford, Halifax, Harrogate, Huddersfield, Wakefield and York), to provide an up-to-date analysis of its strengths, as well as areas to improve.
It is the third report from Whitecap Consulting on the region; the last was published early in 2020, just before the onset of the Covid pandemic.
Positive milestones
The number of fintech startups and scaleups in the region has increased by 263 per cent since 2020
The gross value added (GVA) of fintech in Leeds City Region has increased by 102 per cent since 2020 (now valued at £711.7million)
The number of firms estimated to be operating in the fintech sector grew 105 per cent to 207
The fintech workforce increased 23 per cent to 7,804
Leeds is one of eight UK cities with two or more of the UK’s 112 tech unicorns, of which almost one in four nationally are fintech firms
Leeds is the only city outside London to be home to all three of the UK’s major credit reference
agencies
Sixty national and international financial services firms have headquarters or operational bases within the region
Venture capital investment into Leeds startups increased from £153million in 2021 to £288million in 2022
Since the last report, a notable trend has emerged, with the rise of fintechs that focus on sustainability and green finance
The Financial Conduct Authority, the UK Infrastructure Bank (UKIB) and Bank of England now have bases in Leeds
The report also highlights how LHV Bank, Iwoca, Recognise Bank, Global Shares and PEXA have established bases in the region. While new startups over the last two years include Answer Pay, a certified provider of Request to Pay services, and green fintech Tred.
Report reaction
Chris Sier, HM Treasury FinTech Envoy for England and chair of FinTech North, suggest Leeds “continues to thrive” due to the strength of its financial, tech, and fintech sectors, “which have always been strongly supported by the public sector and the region’s many universities”.
Charlotte Crosswell OBE, chair for Centre for Finance, Innovation & Technology (CFIT), also described the growth of the fintech sector in Leeds as “very impressive”. She added that “it is important we continue to enhance the links between industry, academia, government and regulators to support this exciting sector, and ensure that its impact is felt up and down the country.”
Euan West, office senior partner in Leeds for accountancy firm KPMG, commented: “Leeds has a burgeoning tech cluster and is the UK’s second centre for banking after London, making it fertile ground for the city’s fintech ecosystem to thrive. Leeds has the right talent and networks to support the growth of banking giants, challengers and startups as they collaborate with forward-thinking developers to drive forward the sector’s digitalisation.”
Areas to focus on
The Whitecap report, launched at an event at Leeds Building Society’s head office this week, looks at the key focus areas of talent, education, collaboration and funding.
Talent and skills
The report describes the talent pool in Leeds as “young and increasingly strong” but notes that that hiring senior and experienced staff has become “increasingly challenging as hybrid working becomes more
commonly adopted”.
The fintech industry in the region currently employs over 7,800 people, but many employers still face challenges in finding skilled talent. The report suggests that the nature of fintechs is such that firms that were traditionally purely financial services firms need tech talent and are now also competing with bigger software companies.
“With the recent cost of living crisis and salaries going up, this has made it especially hard for startups and scaleups to find the talent they need,” it reveals.
University engagement
Because Leeds City Region is home to nine universities, as well as 14 further education colleges, this should provide a strong pipeline of talent for the fintech sector to support startups, scaleups and established firms, including those looking to expand in the region.
But fintechs, startups and scaleups express concern that they do not understand or receive clear communication about the current opportunities to engage with universities.
Funding and investment
Despite the growth in investment in Leeds’ fintech sector in recent times, access to funding remains a challenge for many startups to navigate. During the course of the report’s research gathering, fintech entrepreneurs spoke about “the difficulty they face in identifying and connecting with suitable investors”.
Whitecap’s report also suggests that smaller fintechs do not always receive clear communication about funding opportunities. They could also benefit from increased awareness regarding where to seek support and advice. This could be through peer support groups or improved regional awareness of national innovation grant funding opportunities.
Financial services and fintech collaboration
The digital sector in Leeds City Region fosters a strong environment for collaboration by offering various initiatives, including Leeds Digital Festival, Leeds Digital Forum, FinTech North, WILD Digital, LegalTech in Leeds and the MIT REAP programme.
However, the report suggests there needs to be a better connection between the established financial services firms and fintech startups and scaleups in the region. They also want better opportunities for deeper collaboration and to engage beyond events.
So, what’s the next steps?
Help develop skills
Richelle Schuster, head of innovation at Leeds City Council
“We try to take a long-term view of the skills pipeline,” said Richelle Schuster, head of innovation at Leeds City Council during the report’s launch event. “So, we know it’s tough to get talent right now that’s ready made, but we do an excellent job in carving out these routes to developing the skills that you need. That’s the way we have to look at it from a city perspective.
“We need talent from different places and I think that’s really important. Hence why we’re working with schools and colleges to really help them understand the industry, understand the technology and see where they might fit and I suppose more importantly, understand and develop those mindsets that want to make a difference, that want to change things and disrupt things and think differently, regardless of the sector. This is about how we harness all our talents as a city.”
Change how we educate
Nabi Omidvar, associate professor in AI at University of Leeds, suggests that the education system could help play a role by addressing the way it designs programmes.
He said: “A university is historically focused on fundamental knowledge, and I think the challenge when it comes to fintech is for the investors to really understand the ecosystem because it’s very fast moving in both the technology side and the applications of those.
“I’m interested in really getting the right message from the industry sector, so that we can incorporate that information into the way that we design programmes. It may come out as maybe a specialised Master’s programmes or maybe even dedicated short courses. But on the education front, the role that we can potentially play is to shake up and maintain relevance.”
Be more collaborative
Julian Wells, director financial services and fintech, Whitecap
“Obviously every sector is having some issues with talent at the moment particularly the tech-driven sectors,” said Julian Wells, director financial services and fintech at Whitecap. “That’s a recognised issue not only in Leeds but also everywhere else. There’s a smaller number of more experienced people that are available but when you also have tech-driven sectors you need many skills that didn’t exist before.”
It’s not just the fintech industry that is fast growing, says Wells, but other areas like legaltech or healthtech.
“They’re all needing people with data skills or people with analysis skills that haven’t necessarily existed, so they are all fighting for similar skills. Yet businesses don’t necessarily understand what universities can offer them, such as collaborative research projects, knowledge transfer, partnerships, internships, placements and all that kind of stuff.”
Improve marketing to attract more startups
For Will Ellis, sales director at API-driven lending platform EQ Credit Services, more effort is needed to attract startups to establish a base in the Leeds City Region.
“We have about 150 lenders that we work with across the UK and only about 10 per cent of those are in Leeds. I think there’s still work to be done in the region in terms of getting head offices to Leeds as what we tend to find is established lenders open up operational centres in Leeds or technology hubs rather than coming to the area as their first office. I still only have a handful of meetings with decision-makers that are in Leeds, as typically they are based in Cardiff, Manchester, Birmingham or London.
“There is a rich talent pool of people and established data providers in this area so there’s absolutely an opportunity to hire a range of skills from operational to technology people. We’ve got data providers, credit reference agencies, system providers, payment providers and if you think about attracting people to the region, there’s a huge amount of meetings that a business could have with all those providers.
“But I don’t necessarily know if we market ourselves well enough as a region with regards to all of those providers, such as ‘Come to Leeds and you can meet all of those’. One of the ways we are ‘winning’ as a company when hiring is offering a connection to purpose, a collaborative environment and making it somewhere that is an interesting place to work.”
Download the Leeds City Region Fintech Ecosystem Report 2023
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