UK FinTech outperforms global sector amidst sharp funding decline
By Gaia Lamperti
Investment in British FinTech firms in H1 of 2022 increased by just 24% YoY, compared to the stellar 207% growth in the same period last year, despite the global slowdown in funding. These findings come from the latest figures from Innovate Finance, showing that the UK FinTech sector has experienced growth to $9.1 billion in the first half of the year.
But if we think that worldwide inflation and a looming economic recession have resulted in a reduction of IPOs and a stock market rout, making it harder for firms across the UK to raise funds, the figure is still impressive, with the country outperforming the global sector.
The only nation to receive more FinTech investment than the UK, raising $25 billion in capital in the first half of the year, was the US. This comes amidst trends of high-growth tech firms swerving a London IPO in favour of listing on the New York Stock Exchange. The London Stock Exchange (LSE) is backing a new review looking into the rise and fall in funding and valuations in the fintech industry over the last few years.
New research from JPIN, the largest bilateral investment banking platform across UK/India, also highlighted that it is not just retreating investors that are affecting the sector, with 26% of the UK workforce citing a lack of tech talent as another key factor holding back business growth. Whilst the “ground-breaking’ review aims to address the issues permeating the fintech industry, Nayan Gala, Founder of JPIN, explained that firms must – and are already beginning to – look beyond the borders of Britain.
“Looking further afield for funding opportunities is becoming increasingly important, especially given what the global market has been through over the last two years. Trends of international investment are already here and prove vital in providing opportunities to scale up. Pret A Manger’s expansion to India is a great example of this, and I expect to see many companies in the FinTech sector also looking to both expand and source investment from Asian countries in the next few years,” he said.
Boosting growth in East
Some of the world’s most influential emerging markets could be key in providing pockets of capital to ultimately help and transform the UK’s FinTech sector in a post-Brexit world. The United Nations Conference on Trade and Development’s 2022 World Investment Report has revealed that flows of Foreign Direct Investment (FDI) to developing economies rose by 30% – the highest level ever recorded – largely due to contributions from Asia.
A few of Britain’s largest and most well-known conglomerates have already begun looking East to receive funding and boost growth, with Reliance Industries recently announcing a franchise partnership with Pret A Manger to launch and build the British chain across India. This partnership demonstrates a key milestone between the India and UK corridor, highlighting the significance of establishing a strategic relationship with the nation. Whilst FDI inflows heavily declined in 2021, outward FDI from India rose 43% to $15.5 billion in the same year. The country has continued to break records in business activity in the past year alone, as earlier this month, it reported $82.3 billion in mergers and acquisitions in the last quarter, despite the global volume being down 8.7%.
“With the pandemic and general economic uncertainty having created a unique and arguably challenging landscape in Britain’s FinTech sector, India presents itself as a key driver in providing a sufficient means of capital for firms looking for opportunities to scale up,” Gala added.
“India’s record-breaking quarter for M&A activity clearly illustrates the country’s wealth in investment opportunities. As one of the leading hubs of IT and technology, I expect to see an increasing number of startups turning East in search of funding opportunities that can assist with their scale-up efforts in such a bleak socio-economic landscape.”
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