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UK fintechs fear for their future

UK fintechs fear for their future

The UK’s fintech sector faces an uncertain future, with almost half of firms flagging the potential risk of failure by the end of 2023, according to new research commissioned by business advisory firm FRP.

In a poll of more than 250 UK fintechs, FRP found that 48% of businesses in the sector weren’t confident of their ability to trade through the next six months, as challenges relating to inflation and interest rates persist.

FRP’s research identified a heightened risk among smaller businesses in the sector (52%), although concerns regarding insolvency remained high among more established fintechs - with 38% of those with at least 50 employees suggesting they were at risk.

Against a backdrop of rising interest rates, two in five firms (41%) have found funding harder to come by over the past 12 months, with similar numbers (43%) accessing finance with greater ease.

The majority of the 250 business leaders FRP polled said that they had reviewed and amended their exit strategy in the past year. The most popular option was to seek consolidation, while a third (35%) were more bullish in seeking new acquisitions - suggesting a wave of M&A activity is maybe on the horizon.

Notably, firms in regional fintech hotspots in the Midlands (58%) and the North East (56%) were perceived to be most at risk, while cities such as Manchester and Leeds in the North (42%) were more confident about their financial health. The level of London firms worried about their ability to trade through the next six months (46%) was broadly in line with the national average.
contrasting with just a quarter (27%) of male decision makers.

Dan Conway, partner and restructuring specialist at FRP, said: “The UK’s fintech sector remains internationally renowned. However, as with all innovative industries, it relies on the support of investors to drive early-stage growth as new products and technologies gain traction and become commercially viable. Interest rates and broader economic headwinds are clearly a challenge, with funders ultimately becoming more diligent in how and where they deploy their capital - particularly with other sectors offering potentially safer bets.

“For those eyeing consolidatory support, the coming months will be crucial in optimising their commercial operations and future profitability to develop the best proposition for would-be suitors or new investment.”

Comments: (1)

Bob Lyddon
Bob Lyddon - Lyddon Consulting Services - Thames Ditton 17 July, 2023, 10:51Be the first to give this comment the thumbs up 0 likes

Now we know why Jeremy Hunt's pension reforms will compel 5% of discretionary funds to be invested in 'high-growth' (in English 'high-risk') companies. Having bent the law to allow Silicon Valley Bank UK to be purchased within the HSBC ringfence and thus offer protection to this sector, the UK authorities have belatedly realised that they have not cured the problem but postponed its denouement. Where the markets do not work to confirm a pre-baked intention, find some stuffee...in this case a pension saver who has not made a specific election of where their money should be placed.