Fintech investment rises despite overall decline in start-up funding

THE UK’S fintech and blockchain sectors bucked a wider decline in start-up funding in 2018.

The amount of investment into UK fledgling businesses fell from £8.6bn in 2017 to £7bn last year, according to research produced by Beauhurst.

The report revealed a 10 per cent drop in deal numbers across all sectors and 19 per cent in the amount invested. The average investment size also fell by 15 per cent.

Deals at seed stage for the UK’s youngest companies dropped 15 per cent in 2018, a level that was previously recorded in 2014. Beauhurst noted that this will need to be corrected if the UK wants to hold on to its place as a leading start-up economy.

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However, fintech and blockchain start-ups recorded all-time highs in relation to the number of funding rounds achieved in 2018. For example, Beauhurst found that blockchain start-ups reported a 75 per cent rise in deals compared with 2017.

In 2018, 10 per cent of deals that took place were in the fintech sector, particularly amongst challenger banks and alternative finance providers. In 2018, fintech deals totalled £1.3bn, which was £15m lower than 2017’s total. Nevertheless, funding for the sector increased by eight per cent during the year.

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“As we enter a period of unprecedented political uncertainty, it is tempting to interpret these numbers as the beginning of a more pronounced decline,” said Henry Whorwood, Beauhurst’s head of research and consultancy.

“When looking into the data underlying these figures, the prognosis is much more nuanced.”

He pointed out that 2017 saw a huge spike in the amount invested into more established companies, which was unusual.

“The 19 per cent fall in the amount invested between 2017 and 2018 must be understood in this context,” he added.

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