UK Fintech Startups Witness Lowest Quarter in Six Years, Substantial Decline in Funding – Report

Tracxn, an international market intelligence platform based on SaaS, has recently unveiled its Geo Quarterly Report for Q3 2023, focusing on FinTech in the UK.

Leveraging its extensive database, Tracxn’s report provides valuable insights into the UK FinTech space.

The report highlights that the UK is the third-ranked country in terms of overall funding for FinTech startups, following the US and China.

Notably, over 12,000 companies in the UK are operating in the FinTech sector, comprising almost 10% of the global FinTech market.

FinTech has emerged as one of the top-performing sectors in the UK, both in terms of funding activity and the number of companies in the region.

The UK boasts the second-highest number of unicorns in the FinTech space, second only to the US.

Moreover, London is recognized as one of the cities with the third-highest number of FinTech unicorns worldwide.

The UK has established itself as a major hub for FinTech companies thanks to its abundant talent pool, high adoption rate of FinTech services, significant concentration of financial and professional services firms, and progressive regulatory environment.

Despite these advantages, the UK FinTech market has experienced a decline in funding in 2023 due to various factors such as the current macroeconomic environment, rising interest rates, inflation, and surging gas prices in the region.

The Q1 2022 marked the peak funding period for the UK FinTech ecosystem, after which funding gradually decreased. Furthermore, 2023 has turned out to be the least funded year since 2019, based on the funds raised in the first three quarters of the year. Q3 2023, in particular, has become the least funded quarter in the last six years since 2017.

In terms of funding raised in Q3 2023, the UK ranked fifth, while it secured the second position overall in terms of funding raised in 2023 year-to-date.

During Q3 2023, the UK FinTech sector garnered $279.1 million in total funding, representing a significant 79% decrease compared to the $1.3 billion raised in Q2 2023 and a 77% decline from the $1.2 billion raised in Q3 2022. This decline can be primarily attributed to the reduction in late-stage and early-stage investments.

Specifically, late-stage funding witnessed a substantial decline of 81% in Q3 2023, amounting to $147 million, as compared to the $777 million raised in the previous quarter, Q2 2023, and an even larger plummet of 83% compared to the $871 million raised in Q3 2022.

Similarly, early-stage investments in Q3 2023 amounted to $82 million, reflecting a sharp drop of 81% from the $441 million raised in Q2 2023 and a decline of 65% compared to the $235 million raised in Q3 2022.

Seed-stage funding also suffered a decline in Q3 2023, reaching $50.4 million, which marks a 46% decrease from the $93 million raised in Q2 2023 and a 20% drop compared to the $63 million in Q3 2022.

Notably, none of the FinTech companies in the UK managed to secure a funding round exceeding $100 million in Q3 2023. Furthermore, there were no new additions to the Unicorn club during this period, contrasting with the one new Unicorn achieved in the corresponding quarter of the previous year.

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