Brexit depression casts dark cloud over UK fintech investment
16 November 2016 | 6791 views | 1
The depressing Brexit effect on UK fintech investment is starkly illustrated in Q3 figures prepared for Innovate Finance which show a 26% drop in funding for British startups.
Overall global investment for financial technology increased by 27 % to $15.2 billion to Q3 2016 with 839 deals in total according to statistics compiled through Pitchbook, already surpassing the 2015 total of $14.9 billion.
While total global investment soared, UK VC investment for fintech firms decreased by 26% to Q3 2016 to $532 million and is approximately half of the total 2015 investment of $1.1 billion.
China outpaced the US for the first time in deal value while the US saw the highest deal volume with 10 of the top 20 global deals.
The UK attracted 76 deals this year, the highest volume outside the US at 457, and remained third place behind the US and China in terms of total investment, which valued $532 million. Of the top 20 global deals, only one company was from the UK - Starling Bank - which secured $101 million in funding.
Over 60% of the UK VC investment in fintech in 2016 was in challenger banks, SME financing and money transfer, FX, distributed ledger and digital currency verticals. Eight of the top 20 UK deals closed post Brexit totalling $105m. 64% of the UK deals in Q3 were follow-on investment rounds and 67% of UK investments for this period were by UK domiciled funds.
More worryingly, Innovate Finance claims 30 fintech start-ups have had their funding cancelled or postponed by investors since the end of June, forcing them to seek urgent funding elsewhere.
A quarterly survey of fintech investment trends by KPMG and CBInsights backed up the gloomy assessment. Their just-released Q3 report shows that the UK saw decreases in both the number of deals and total investment in the quarter, while the German fintech sector is now on track to outperform the UK this year
Commenting on the findings, Lawrence Wintermeyer, CEO of Innovate Finance says: “While the UK still attracted a high number of deals for fintech there’s been a significant drop in investment year on year to Q3 2016. Ahead of the Autumn Statement Innovate Finance urges the Chancellor to ensure the UK continues to drive investment and innovation, attract talent and maintain an open trading relationship with the EU and globally.“