Kalifa Review on the UK Fintech sector

The UK fintech sector has been a vibrant growth story over the past decade or so and, not surprisingly, the UK Government and the sector itself is keen to ensure that it stays that way.

In 2020, the Chancellor of the Exchequer, Rishi Sunak commissioned a report into the UK fintech sector by Ron Kalifa OBE and this report was duly delivered in February 2021. The Kalifa Review makes a number of recommendations in order to keep the UK at the forefront of the fintech sector worldwide, particularly as there is fierce competition from the United States, Europe, Singapore and Australia.

The current strength of the UK fintech market is shown by the fact that:

  • it is estimated to represent 10% of the global market, at £11bn;
  • total tech spend by UK financial services firms in 2019 was £95bn;
  • SMEs, corporates and now UK citizens are all increasingly active digitally and 71% of UK citizens are now using the services of at least one fintech company;
  • in 2020, investment into UK fintech was approximately US$4.1bn – this was more than the next five European countries combined.

The Kalifa Review has made a number of important recommendations in five key areas:

  • policy and regulation;
  • skills and talents;
  • investment;
  • international attractiveness and competition; and
  • national connectivity.

Whilst the review makes a large number of recommendations under each sector, we focus below on 2 of the recommendations that have arguably the most significant legal and commercial impact for fintech companies and their investors.

Policy and regulation

One of the key recommendations is the implementation of a regulatory “scalebox” that will support firms focusing on innovative technology by helping them to grow rapidly which is key in the fintech arena – this essentially involves the enhancement of the existing FCA regulatory sandbox which was first introduced in 2016 and has been vital in supporting UK fintech businesses. It allows these businesses to take part in a programme regulated by the FCA under which live transactions can take place and the compliance of fintech products with regulations can be monitored. This has been a success story and followed by several other jurisdictions.

The aim of this recommendation is to provide additional regulatory support to fintech businesses by allowing the regulatory sandbox to be more widely available. providing specialist support to those engaged in Priority Fintech Areas.


Whilst large sums have been raised through private funding for the UK fintech sector, the Review concluded that the UK has been less proactive than some competing countries in attempts to attract fintech companies to list and scale up rapidly to operate on a worldwide basis. As a result, the UK has been falling behind in offering fintechs access to public capital. For example, between 2015 and 2020, the LSE only accounted for 4.5% of global IPO listings, compared to 39% which were listed on the NASDAQ and NYSE in the US. As a result, the Review recommends that certain LSE rules should change to make it more attractive for IPOs generally:

  • the free-float requirements on the Premium Listing segment should be reduced from 25% to 10% of issued shares after an IPO or replaced altogether with a specified value (as happens in the US and other markets);
  • enhanced governance rights – a golden share or dual class share structure should be permitted so that it is possible on an IPO to have two different classes of shares with different voting rights, which will allow founders and other pre-IPO holders to have enhanced voting rights/governance rights, i.e. founders can retain greater control after the IPO.

There were also recommendations to amend the current R&D tax credit system by allowing the cost of creating financial data sets to come within the R&D tax credit regime. In addition, the current EIS, SEIS and DCT tax reliefs should be extended so that they also apply to regulated companies and are not confined to unregulated companies only.

Finally, the Review recommended the creation of a £1bn Fintech Growth Fund which would draw on UK pension funds and be a specialist fintech growth fund. The fund would be modelled on the Business Growth Fund (BGF), adopting similar principles but with the support of BGF which currently is not allowed to invest in fintechs – this would enable fintechs of all sizes to benefit from funding.


The review has been well received by the fintech community and there is a widespread feeling that the recommendations can entrench the UK fintech sector by building on the fact that Covid has led to the increased digitisation of financial services and the opportunities from Brexit to develop UK regulations specially tailored to fit UK business needs. In his recent statement, Chancellor Rishi Sunak has confirmed that the government and bodies such as the FCA will be looking to implement the key recommendations.