London - The skyscrapers rising between the eastern bends of the River Thames are emblazoned with some of the biggest names in banking: Barclays, HSBC, JPMorgan and Citi. But the future of finance hangs out on the 39th floor of the tallest building of them all.
That's the home of Level39, a technology incubator where millennial entrepreneurs share open workspaces, a communal kitchen and a daily ritual of snack breaks featuring freshly baked cookies. The startups are rethinking every aspect of money, from crowdfunding to the complex networks that power the world's stock exchanges. Top bank executives regularly drop by to scout new ideas, and investors poured $900 million into the fledgling industry last year - creating a heady fusion of Wall Street and Silicon Valley that was supposed to drive the next generation of London's financial dominance in Europe.
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But Britain's historic vote last month to leave the European Union is now forcing the country's most promising young companies to re-evaluate whether to stay in the island nation or abandon ship. The debate is one of the many ways a British exit, or Brexit, has upended the country's economy - and probably no industry more than finance. Banks saw steep drops in their stock prices in the days after the referendum. Now, even as the market panic subsides, Brexit is raising existential questions about London's future as one of the world's great financial capitals.
“We've got a healthy ecosystem,” said Lawrence Wintermeyer, head of Innovate Finance, which represents financial technology firms. “And now? A serious blow has been dealt to London as a financial centre as a result of the referendum.”
Before the vote, Britain's economy was one of the standouts amid the sluggish growth and persistently high unemployment plaguing much of Europe. Now, forecasters expect that uncertainty over the country's next steps will slow its expansion and possibly even push it into recession.
The financial sector is one of the largest industries in Britain, driving nearly 12 percent of the economy. It employs about 1 million people, and 1 million more work in ancillary fields such as law, accounting, consulting - and, increasingly, technology. Alain Falys co-founded mobile payment and rewards app Yoyo Wallet in London three years ago, and the company is an industry success story that is now becoming one of Brexit's cautionary tales.
Yoyo Wallet briefly operated out of Level39's office but soon took over its own space. It now handles 400 000 transactions a month and employs about three dozen people in London. Falys said he wants to hire 10 more - but they may not be in Britain. After the vote, he moved up plans to establish an outpost in Portugal, part of the 28-nation European alliance, that would allow him to freely hire workers from across the continent. The “referendum result has created a greater sense of urgency for us”, said Falys, who flew to Lisbon days after the vote.
Businesses across the United Kingdom are worried that Brexit will lead to limits on immigration, a stance that would hit the heavily international financial community particularly hard. At Bankable, for example, one of the startups housed at Level39, the chief executive is French and the employees hail from Thailand, Nepal, the United States, Italy and France. Only two are British.
One of the central underpinnings of the European alliance is that residents can move and work freely among member nations. Companies can hire workers across the EU without filing cumbersome paperwork or applying for special visas, processes that can take weeks to complete. But it's unclear what EU immigrants' status will be once Britain abandons the partnership or how difficult it might become to hire new workers.
“If nothing happens, okay, we're lucky,” said Rashee Pandey, head of marketing and communications at Bankable. “But if something happens... Where is Plan B?”
Also critical to the financial industry are “passporting” privileges, which allow British companies to provide services across the EU’s common market yet answer only to their domestic regulators. In fact, experts said, the arrangement helped London edge out Paris and Berlin over the past 15 years as the financial capital of Europe as firms flocked to a government known for a light regulatory touch. France and Germany have already begun eyeing London's lucrative business as a clearinghouse for euro-denominated trades.
Maintaining those rights is one of the top priorities for the industry in any post-Brexit regime. Without them, companies say, they could be forced to split their operations, with one division serving Britain and another for continental Europe.
So far, London's biggest banks say it's business as usual as they wait for the outcome of Britain's negotiations with Europe over the terms of departure, and it could be years before there are any clear answers. Goldman Sachs is in the midst of building a new multimillion-dollar headquarters in the heart of the city. HSBC decided this year not to move its base to Hong Kong and recently affirmed its commitment to London.
“Europe needs a strong financial-services sector. Replacing that would be decades,” Douglas Flint, group chairman of HSBC Holdings, said at a conference of financial executives last week. “Germany wants to sell cars. France wants to sell wine and cheese. Markets go to where the expertise is.”
Many entrepreneurs want to stay in London as well. Few other places offer such concentrated access to regulators, executives and investors along with digitally savvy customers. Britain is one of the largest economies in the EU, and businesses say it will remain a critical market even after it leaves.
But London's high-energy startup scene doesn't have the luxury of time. Companies need to grow rapidly in order to attract investors to finance even more growth - and that means decisions on whom to hire or where to do business cannot hinge on the plodding pace of EU negotiations.
At Level39, even the trays of warm cookies set out for the daily snack break don't last long. A bell rings every afternoon at 3pm to herald their arrival, and the startup workers gather in the communal kitchen for coffee and informal networking as a television broadcasts the latest twists in the post-Brexit political drama. Tim Potocnik recently joined Level39 in anticipation of moving his 20-employee company, Eurosender, to London. Then Brexit happened.
Potocnik described his new plan after polishing off two cookies on a recent afternoon: establish a holding company in London but move his operation - and the 20 jobs that go with it - elsewhere in Europe, perhaps Berlin.
London had been a “no-brainer”, Potocnik said. “Now it's like, should we do it? Should we wait? You lose a little bit of confidence.”
And by the time he had finished talking, the rest of the cookies were gone.
THE WASHINGTON POST