UK fintech funding falls amid global slowdown, but London remains well ahead of global rivals
Monday 09 January 2023 at 03.00
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Investment in Britain’s fintech sector fell eight per cent last year, but stayed well ahead of rival hubs in Europe and Asia amid a sharp global slowdown, fresh data shows.
Rising inflation and the shocks of war in Ukraine put an end to a decade-long global venture capital frenzy last year.
Britain’s fintech sector attracted $12.5 billion worth of capital, down from a strong year in 2021 when $13.5 billion was pumped into the country’s fintech firms, according to data shared exclusively with By AM from UK fintech industry body Innovate Finance.
London firms attracted the lion’s share of investment with $10.2 billion invested in 2022, down just five percent from 2021 amid a sharp global slowdown.
Funding contractions in the UK were markedly smaller than the global average as total global investment fell by almost a third to $92 billion, with the total number of investment deals around the world falling to 5,263 from 6,146.
Innovate Finance chief executive Janine Hirt said the UK sector was ahead of its European rivals and remained resilient in the face of the global slowdown.
“UK Fintechs are holding the fort in securing high levels of investment in challenging economic times, a testament to the resilience and strength of our sector,” she said By AM.
“Our latest report shows that the UK continues to receive more Fintech investment than all of the next 10 European countries combined, and remains second in the world only to the US.”
Investment in the UK came second to the US, which had support of $39 billion. India attracted investments worth $5.5 billion, while Singapore and Germany recorded $5.5 and $2.9 billion respectively.
Venture capital is drying up
Sharp interest rate hikes by central bankers and poor perceptions of loss-making, high-growth companies have changed the fintech investment landscape and prompted venture capital firms to rein in their investments.
Volatility on global markets has also largely prevented planned IPOs and led to high-profile “haircuts” for fintech companies.
London firm Sumup was reportedly targeting a $20 billion valuation at the start of the year, but was forced to scale back its plans and raised $590 million at a valuation of $8 billion. Checkout.com also reportedly reduced its year-end valuation internally from $40 billion to $11 billion.
Fintech challenges
The decline underlines the scale of the challenge facing the sector as UK policymakers and regulators seek to strengthen its status as a hub for global fintech firms.
Ministers have rolled out a series of reforms over the past 12 months in a bid to boost Britain’s appeal as a place for fintech firms to grow and go public. Digital Economy Minister Paul Scully said the government was now looking to put its weight behind the sector in the coming year.
“In 2023, we are focused on maintaining this leadership by supporting start-ups, increasing digital skills and making this country an even more attractive destination to find, grow and invest in technology companies,” Scully said in comments shared with By AM