UK fintech funding tumbles as interest rates dampen investors’ appetite
Funding for the UK’s fintech sector cratered in the first half of the year as further interest rate hikes and economic volatility continue to weigh on investors’ appetite for the market, according to new data.
Total cash raised by UK fintech firms slumped to $2.9bn in the first six months of the year, down 37 per cent on the second half of 2022, according to new figures from industry body Innovate Finance, shared exclusively with Morning Wire
Investment also began to taper off towards the end of the half, with 111 of the 199 deals in the first half of the year – some $2bn worth of the total – taking place in the first three months.
The slowdown comes amid a torrid 12 months for global fintech funding as investors sour on loss-making high-growth start-ups amid wild swings on the markets. In the first six months of 2023, there were 1,714 deals globally with a total capital investmentof $27.3bn, down from $31.7bn invested across 2,500 deals in the second half of 2022.
Chief of Innovate Finance Janine Hirt said the drop in global and UK Fintech investment was an “expected result of the current economic landscape” and reflected the “cautious investor sentiment as seen across equity markets over the last 12 months”.
Volatile public markets have shuttered potential IPO exits for investors and forced firms to slash their valuations as they raise more cash from private investors. A host of big names have been forced to write down their value after a post-pandemic funding frenzy in 2021.
Despite the slowdown, the UK retained its position in second place in terms of fintech investment. The United States remains top with $15.6bn invested across 663 deals.
For the first time, four of the top ten markets are in Asia, with China in third place attracting $1.7bn, Singapore in fourth position with $764m, India in fifth position with $729m and South Korea in ninth position attracting $390m.