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Look beyond London to retain the UK’s fintech crown into the 2030s

Regional fintech hubs need more capital, writes Thomas Gillan, CEO of BR-DGE.

a city with tall buildings

Pexels/Olga Lioncat

This week, UK fintech leaders will gather in London while facing some of the most challenging market conditions in the past decade. 

This year’s headline trade conference UK Fintech Week is a totally different event to twelve months ago. With a backdrop of stalling economic growth and reduction in investment, many will be questioning: will the UK fintech sector remain a global leader in 2023 and beyond?

However, for all the focus on current market uncertainty, resilience has never been higher among the fintech founders I speak to. The stakes may have doubled, but UK fintech remains at the vanguard of innovations globally and is leading the way in Europe. 

We are one of the best places internationally for fintech founders to start, scale, and grow their businesses. It is why the sector is flourishing and continues to deliver breakthrough companies and products, create highly-skilled jobs, and drive growth which benefits the whole UK economy.

Whilst ‘the jewel in the crown’ metaphor might be used by many at the podium this week, we shouldn’t allow this to distract from the job at hand: retaining the UK’s leading position into the 2030s. Here, we should all be aware that the path for how the UK retains its crown over the next decade is going to look different compared to how it claimed the title post-2008.

Our global competitors are moving fast. France’s fintechs received €2.8bn in 2022 in funding, up nearly 22 per cent on the previous year, amid UK levels falling. 

France now has 10 fintech unicorns and German fintech investment in 2022 was 70 per cent above 2020 levels. If innovation has driven the past decade of sector growth in the UK, we are likely to see global competitiveness become critical in the years ahead.

To remain competitive on the international stage, we need to focus on the UK ecosystem as a whole and overcome our often short-sighted focus on London.

We have 26 fintech clusters across the UK and a third of all our fintechs are outside the M25. Yet, in 2022, over 80 per cent of the UK’s venture capital investment into the sector went to London-based firms. 

Whilst this is progress compared to previous years, down from 94 per cent in 2020, there is still more to be done to ensure the rest of the UK isn’t missing out on opportunities for growth.

In Scotland, we have a rich heritage in financial services which has enabled the development of a flourishing fintech sector north of the border.

Firms are supported by increasing collaboration between the public and private sectors, a world-class university system, and cross-sector initiatives such as Converge, Edge, and Fintech Scotland. Founders also have access to Scottish Development International and GlobalScots which are both vital partners for international expansion.

Yet, the experience of the Scottish ecosystem is that whilst early-stage companies are well-served with accelerators, angel investors, and VCs, there remains a later-stage investment gap for companies at Series A onwards. 

Perhaps this limited pool of investors outside of London is one reason why Beauhurst data shows that 3 in 4 of the UK’s unicorn companies are based in the Capital, including all 21 UK fintech unicorns. And if we shift that focus to centaurs, companies with over £100m ARR, the numbers get further apart.

There is a deep pool of talent beyond the capital but there remains untapped potential that could unlock opportunities and benefits for us all. 

I regularly speak of Scottish fintech’s ‘coming of age’ but in order to accelerate growth in the years’ ahead, there is a need for initiatives which promote greater awareness of the opportunities for later stage investors outside of London. This is vital to supporting the ambitions of all our fintech founders.

Today and tomorrow’s meeting presents a crucial health check on whether the sector is doing enough to future-proof itself for the long-term following the Kalifa Review. The government’s ambitions for ‘Scale-up Britain’ is a fine goal but our fintech hubs need more capital to become truly global. This mismatch could have significant implications in the years ahead.

Boosting the UK as a whole will help the sector navigate a decade ahead that will be increasingly defined by global competition.

Thomas Gillan is the CEO of Edinburgh-based payment fintech BR-DGE and Founder of SIS Ventures. The views and opinions expressed are not necessarily those of AltFi.

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