How fintech and ecommerce can profit from Brexit
E-commerce and cross-border lead generation
The exchange-rate for sterling has fallen so low, that the pound is almost at parity with the euro. For cross-border e-shoppers from the rest of the EU, that turns Britain into a massive bargain store.
With even a minimal effort at promotion, UK merchants can attract price-conscious EU consumers. In fact, UK SMEs saw their international sales rise by an incredible 34% in the last six months of 2016, three times the increase in the first half of the year, due to the exchange rate. If ever there was a time to feature the Union Jack accompanied by the words (suitably localised) ‘Brexit bargains’, in your promotions, it’s now.
That’s great, as far as it goes. Everyone wants extra trade even if we’re effectively selling at a discount. But it’s not sustainable and its continuation cannot, in any case, be taken for granted. At some point the pound will rebound or bargain hunters will revert to their previous shopping habits.
So, what to do?
Turn today’s cross-border bargain hunters into loyal repeat shoppers. Invest now in data collection, strategic planning and customer-experience improvements. Use the data you gather on your new customers to engage them and migrate them to localised version of your site. For now, keep them coming back with price-led promotions but over the next year, try to deepen customer relationship, learn their other purchase motivators and give them reasons other than price to keep coming back.
There is no sign of the Eurozone recovery slowing down; in fact, it’s quite the opposite, with the Eurozone economy growing twice as fast as the UK in recent months. And there are already signs, particularly from the automotive sector, that this is releasing pent-up demand. In theory, there’s no reason why UK retailers can’t benefit by servicing this pent-up demand. Successfully doing so — particularly in the face of, for instance, uncertainty over customs arrangements after Brexit — is going to take nerve, commitment, and impeccable customer focus. But it is possible.
Fintech, the City, and a country that loves to borrow, spend, and invest
Brexit threatens a sizable chunk of the UK financial-services industry. Much of the business conducted by UK financial services, most obviously the Euro-clearing markets, relies on access to EU markets. That’s a fact. We can’t wish it away.
But neither Brexit nor the EU are everything. To take a couple of examples, London trades nearly twice as much foreign currency as New York, its nearest rival. This trade does not depend on EU markets. Around 60% of the world’s Eurobonds are traded in London. Despite the name, these have nothing to do with the EU and the trade is not fundamentally threatened by Brexit. Similarly, the £60 billion-a-year London market for commercial insurance draws a third of its clients from North America, a third from the UK and Ireland, and a third from the rest of the world put together, including the EU.
The UK fintech scene has the world’s biggest financial centre at its disposal. And if Brexit threatens to erect barriers that will hinder UK firms trading on the continent, the same is true in reverse. UK fintechs will enjoy privileged access, in geographical and regulatory terms, to the enormous b2b market that the City of London gives them access to.
They will also have privileged access to the UK’s highly competitive retail finance market, worth £58 - £67 billion a year. And there are signs that leaving the EU could help invigorate at least some segments of that market. A recent article in the FT — not by any means a Brexit cheerleader — reported that small-to-medium UK providers of retail banking services are actively looking forward to Brexit in the hope that it will free them from onerous EU regulations designed for huge ‘too large to fail’ banks but now applied to all financial institutions, even smaller ones.
Taken together — along with the ready availability of investment for fintech start-ups in London, and the UK’s sympathetic regulatory environment — these facts clearly signpost a potential future for the UK as a global B2B and B2C fintech incubator.
But this won’t happen by itself. Right now, we’re still faced with the threat of a fintech exodus. To make sure the UK’s fintech motor doesn’t stall, the British government must work out a transition deal with the EU27 that gives London-based fintech firms an incentive to keep at least some of their businesses here for long enough to see what opportunities Brexit and a post-Brexit UK could bring.
And as an industry, we need to lobby as hard for that transition as we have for a PSD2 that’s fit for purpose. Recognising that there are profound risks associated with Brexit does not stop us also looking for opportunity in it. Why should it? For as long as the world hasn’t ended, there is still business to be done.
Simon Black, CEO at PPRO Group
More than half of FTSE 100 execs suffer pay cuts, freezes
Pay increases for many executives at the largest UK firms have been put on hold since the start of the pandemic with more than half of the FTSE 100 CEOs having had their salaries frozen in 2021, according to new research from PwC.
The research, based on PwC’s analysis of the first 50 FTSE 100 firms to publish their 2021 annual remuneration reports, reveals that 53% of CEOs and 52% of CFOs have had their pay reviews put on hold, compared to 35% and 30%, respectively, last year, pointing to the pandemic as the main reason.
According to Phillippa O’Connor, reward and employment leader at PwC, the current environment and impact of the pandemic has clearly led shareholders to sharpen their pencils when reviewing executive pay levels this year.
“It is clear from the pay outcomes we have seen to date in the FTSE 100 that companies have exercised restraint when it comes to both determining outcomes for the 2020 performance year and settling pay on a forward-looking basis for 2021,” says O’Conoor.
Bonuses, grants and pensions also affected
But that’s not all. Around a third (31%) of companies either waived, cancelled or reduced their 2020 annual bonuses, with the average payout dropping from just uhnder £1.1m to £843,000.
When it comes 2021 long-term incentive plan (LTIP) grants, these have also been revised in light of the economic impact of the pandemic with 45% of firms making some adjustment to their award, including retaining discretion to adjust outcomes at vesting in respect of windfall gains, reducing grant size, delaying the grant, and even canceling the award altogether.
The study shows that pension levels for incumbent CEOs remain at 15% of their salary, falling to 10% for new hires, bringing them in line with the wider workforce. Eight out of 10 FTSE 100 companies will have aligned incumbent pension levels with those for the wider workforce by the end of 2022.
O’Connor warns that moving forward into AGM season, there is likely to be added scrutiny around any pay rises that are greater than those for the wider workforce and on incentive outcomes that are “either not aligned with business performance or do not take into account the company’s approach towards matters such as diviends and government support”.
What announcements did UK's big firms make?
Back in April 2020, as the pandemic was just getting started, a number of UK companies, mainly insurance and banking stepped forward to review remuneration packages in response to the economic implications of the COVID-19 crisis.
British insurance giant Aviva announced that basic pay increases for its executive directors and the Aviva leadership team would be paused, while the executive directors of Prudential offered that their salaries be reduced and RSA confirmed its exec directors and executive committee would not be receiving cash bonuses for the current year.
The same was true in banking and finance with TSB announcing that its 10-strong executive committee would give up their bonuses in 2020, while Barclays said its chief executive, finance director and chairman would each give a third of their fixed pay for the next six months to charities. Lloyds cancelled its bonus payments and pay reviews in 2020
Other big UK firms including Ryanair, Taylor Wimpey and Rentokil all committed to reducing their executives pay packages.