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UK fintech investment down in 2016

Investment in UK fintech went down in 2016 but is still ahead of 2014 numbers, according to figures from FinTech Global

Financial technology (fintech) investments in the UK in 2016 fell by almost £176m compared with 2015, but still towered above the figure in 2014, according to figures from data and analytics company Fintech Global.

A total of £936.5m was invested in UK fintech in 2016, with £820m of that in London. This compares with around £1,112m and £963m respectively in 2015. In 2014, a total of £620m was invested in UK fintech.

Richard Sachar, director at FinTech Global, said despite a 16% drop in 2016, the figures are strong compared with 2014. “This underlines the strength of the UK fintech sector,” he added.

Sachar said the numbers are very encouraging and, if the larger deals of £40m or more are extracted from the data, there is strong underlying growth in the number and volume of small and medium-sized fintech investments.

“That’s important to note as it evidences increased support for early-stage companies, which is essential for the continued development of the fintech space,” he said.

Separate figures by Innovate Finance, the fintech trade body, earlier in February 2017 revealed that venture capitalist investment in the fintech sector globally increased by around 11% to reach $17.4bn in 2016.

However, the figures also revealed there was a 33.7% drop in the UK, with the findings showing that $1.2bn was invested in UK fintech in 2015 but only £783m was invested in 2016.

Innovate Finance also found that the UK was third largest in terms of the amount of fintech capital, with the top two of China ($7.7bn) and the US ($6.2bn) way out ahead.

The UK – and London in particular – could see more competition as the UK disconnects itself from the European Union (EU). Startup fintech companies might look in other European countries to set up at least part of their operations.

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If the UK finance firms lose their right to sell across Europe, known as passporting, EU member states will be seen as more attractive locations. This will mean UK finance firms would not have the entire EU market to aim at.

Access to people will also be affected as skilled staff from EU countries might not be able to get the right to work in the UK.

EU countries are looking to take advantage of the uncertainties about the UK’s future. For example, Paris is set to build more skyscrapers in an attempt to lure bank operations from London after Brexit.

Other European countries are investing in startup hubs which will provide the right environments for IT entrepreneurs in terms of access to skills and customer bases.

Meanwhile, in the past five years Sweden has attracted the highest number of fintech investments per capita in Europe, and its capital Stockholm has branded itself as a fintech hotspot. This follows the success of companies such as Klarna and iZettle. Many in the Nordic country believe Brexit could help to boost this development further, at least in the short term.

Then there is the Netherlands, with its capital city Amsterdam already a major startup hub. Amsterdam’s city government promotes the quality of life in the city and its potential as a gateway to Europe to attract talented IT entrepreneurs to its IT startup community.

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