Brexit Uncertainty Sees UK FinTech Funding Fall by 33%

February 10, 2017 14:47 UTC

A new report by Innovate Finance and Pitchbook has found that investment in FinTech in the U.K. fell in 2016 to 33.7 percent while China and the U.S. dominated the sector.

According to the report, The 2016 VC FinTech Investment Landscape [PDF], which was published this month, the U.K. received VC funding amounting to $783 million in 2016 compared to the $1.2 billion in 2015. This was largely attributed to the uncertainty circulating Brexit as well as geo political and macro-economic factors.

While total deals post-Brexit amounted to $368 million in 2016, year on year investment decreased every quarter except Q3 compared to 2015 figures.

Lawrence Wintermeyer, CEO of Innovate Finance, said:

The loss of passporting rights will hit FinTech payments firms if special provision to the single market are not negotiated upon leaving the union. Attracting further investment to the UK FinTech remains the number one priority.

Despite the findings, though, the U.K. ranked the third biggest location for FinTech investment after China and the U.S with 173 deals.

China and the U.S Lead the Way

The report found that globally there were 1,436 financial technology deals in 2016 attracting $17.4 billion. Of that amount FinTech funding in China and the U.S., combined, it totalled $13.9 billion.

For the first time, though, China outpaced the U.S. by attracting the largest VC investment at $7.7 billion over 28 deals, an 84 percent increase on 2015 figures of $4.2 billion.

The biggest investment in China came from Alipay’s Ant Financial, which received $4.5 billion in 2016, the biggest FinTech VC round in history.

Yet, while the U.S. continued to dominate the sector, ranking second behind China, funding decreased in the U.S. in 2016 by 12.7 percent to $6.2 billion despite leading the way with the highest number of deals at 650.

China for the Top Spot

Recently, China has been ramping up its efforts in the FinTech race to become number one.

So much so, that while investment in other countries is witnessing a decline, in China it doubled in 2016.

Not only that, but last month it was announced that Hong Kong-based industry investment firm, Credit China Fintech Holdings Ltd. was entering a $30 million agreement with bitcoin and blockchain industry giant BitFury. It’s believed that such an agreement is expected to boost investment in BitFury shares as the two focus on the Chinese market.

Of course, it’s clear to see how far the Chinese nation has come at outpacing other nations within the financial technology sector.

Last October, a report found that there is a possibility that China could push the U.K. off the top spot as the FinTech lead hub after eight Chinese firms had made it within the FinTech 100 list, four of which made it within the top five.

Yet, with Brexit negotiations proving conflicting as the trigger of Article 50 gets under way, it remains to be seen how much of an impact further funding will have on the U.K.’s FinTech in years to come and whether it will retain its number one position.

Featured image from Shutterstock.