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UK fintech investments slump over Brexit fears

Investment in UK financial technology companies fell in 2016 because of the uncertainty caused by the Brexit vote

Global venture capitalist investment in the financial technology (fintech) sector increased by about 11% to reach $17.4bn last year, but there was a 33.7% drop in the UK.

The UK retained its place as recipient of the third-largest amount of fintech investment, with China ($7.7bn) and the US ($6.2bn) way out ahead.

The findings, from research commissioned by Innovate Finance, the fintech trade body, showed $783m was invested in UK fintech in 2016 compared with $1.2bn in 2015.

In July 2015, about a year before the UK’s Brexit vote, Innovate Finance said the sector was worth £20bn in annual revenues to the UK, employed 135,000 people and had attracted 42% of all European fintech investment in 2014. It said the sector was targeting the creation of 100,000 jobs and $8bn of investment by 2020.

Lawrence Wintermeyer, CEO of Innovate Finance, said the 2016 slump was “largely attributed to the uncertainty of Brexit and geopolitical/macro economic factors”. But funding rebounded at the end of the year, he said.

“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.

However, access to talent after Brexit is a bigger concern than the loss of passporting rights, he said. “Over 30% of Innovate Finance fintech founders and CxOs are non-British, with many employing European staff. Attracting further investment to UK fintech remains the number one priority.”

Read more about fintech in Europe

This is a problem shared by IT startups in other sectors that use developers from across Europe. Countries that can offer fintech and other startups access to the right skills will be increasingly attractive.

Speaking at an event before the Brexit referendum last June, Tugce Bulut, CEO and founder of global intelligence platform Streetbees, said when she chose to set up the company in London, its EU membership was an important factor. “If the UK leaves the EU, it will be hard for us to get the right staff and we will have to relocate. That is not even up for discussion because we cannot lose this talent,” Bulut said at the time.

“The reason we are in London is because it gives us access to the best talent. There is no better place in the world if you are running a business where you need multiple languages and cultural diversity.”

Berlin, Amsterdam and Copenhagen are among European cities that are actively attracting IT startups, including those in fintech. .......................................................................................................

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