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Funding For UK Fintech Surges Despite Brexit Vote

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Weathering Brexit…funding skyrockets for British fintech start-ups, as UK ranked third for investment

The financial prospects for British fintech start-ups has not apparently been diminished by the Brexit vote earlier this year.

The decision to exit the European Union had prompted widespread concern and uncertainty about the state of the UK’s finances going forward.

But new research has found that for one vital sector within the UK’s hugely important financial services industry, Brexit has not had much of an impact.

money-1Fintech Funding

Indeed, according to Pitchbook by Innovate Finance,  investments in British fintech firms in the first half of this year have now topped pre-Brexit levels.

Innovate Finance said that over half a billion dollars ($564m or £432m) had been funnelled into British financial technology companies in the first half of 2017.

This is over a third more (37 percent) than the same period last year.

But it should be noted that this $564m of fintech investment in H1 2017 was lower than pre-Brexit H1 2015 figures of $676m.

Over half of this funding (54 percent) came from outside the United Kingdom.

And the good news continued after the research also revealed that Britain is ranked in third place globally for fintech investment, behind the United States and China.

The United States attracted the most fintech funding ($3.3 billion over 357 deals), while China achieved $1bn of investment.

“The UK attracted 102 deals this quarter, the highest volume outside the US, and remained third place behind the US and China in terms of total FinTech investment,” the research found. “Of the top 20 global deals, two companies were from the UK - Atom Bank, which secured $102 million in funding, and Funding Circle, which raised $101 million.”

Most of the UK fintech funding in H1 2017 went into  alternative lending firms (28 percent), challenger banks (25 percent) and wealth management (13 percent).

Post Brexit

“The investment data for the first half of 2017 shows that global FinTech investment is down verses the same period in 2016,” said Abdul Haseeb Basit, CFO of Innovate Finance.

“However if you adjust for the exceptional mega-deals in China in H1 2016, where three companies, Alipay, Lufax.com and JD Finance, raised over $1billion each, we see that global investment has gone up 28.4 percent,” he added. “The sector continues to thrive.”

And this is despite concern that the UK’s vote in June to leave the European Union would lost its status as the main European hub for fintech.

“Despite the uncertainties of Brexit, the UK retains its position as a leading FinTech hub and has attracted more investment in H1 2017 than the same period last year,” said Haseeb Basit. “These investment figures are lower than H1 2015, signalling a slow return to pre-Brexit funding levels.

“The UK government needs to continue its support for the sector, by ensuring the country remains attractive to talent and investment, while also maintaining an open trading relationship with Europe and the rest of the world.”

Earlier this year the European Commission (EC) launched a three-month consultation into the EU’s fintech sector, as it mulled the introduction of regulatory changes to foster the industry’s continuing growth and development.

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