09 Feb 2017   |   News

Fintech investment in UK slumps by 33 per cent on back of Brexit uncertainty

Private funding for fintech fell from $1.2B in 2015 to $783M in 2016, as investors reacted to vote to leave the EU

Brexit uncertainties prompted a 33 per cent fall in funding for UK financial technology start-ups in 2016, according to new data from the trade body Innovate Finance.

Investors have cancelled or delayed funding for companies in mobile banking, robo-advisors and blockchain technology.

Overall, $783 million was invested in UK fintech in 2016 compared with $1.2 billion in 2015.

However, the UK and London in particular, remains the third biggest magnet for fintech investment after China and the US.

There were 1,436 fintech deals globally, attracting $17.4 billion, with China outpacing the US for the first time, with $7.7 billion invested, while the US invested $6.2 billion.

Lawrence Wintermeyer, CEO of Innovate Finance, said the 2016 slide in the UK was, “Largely attributed to the uncertainty of Brexit and geopolitical/macro-economic factors.”

He called for a Brexit deal which maintains UK passporting rights, which allow companies in the 28 EU states plus Iceland, Liechtenstein and Norway to sell their products and services throughout the EU bloc.

“The loss of passporting rights will hit fintech payments firms if special provisions to the single market are not negotiated upon leaving the EU,” said Wintermeyer.

A bigger concern is continued access to talent after Brexit. Over 30 per cent of Innovate Finance’s 250 members are run by non-British fintech bosses and many employ staff from mainland Europe, Wintermeyer said.

The 2016 slump could be a portent of prolonged investor hesitancy, with the UK not likely to wrap up a divorce deal from the EU until 2019.

This leaves cities like Frankfurt, Dublin and Amsterdam with an opportunity to boost their own financial hub status, and so far they have not been shy in making offers to UK companies to relocate.

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