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.

Image source: Pexels/Olga Lioncat

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

This year’s graduate conference UK Fintech Week is a very different event to twelve months ago. Against a backdrop of stalled economic growth and a reduction in investment, many will be asking: will the UK fintech sector remain a global leader in 2023 and beyond?

But for all the focus on today’s market uncertainty, resilience has never been higher among the fintech entrepreneurs I speak to. Efforts may have doubled, but British fintech is still at the forefront of innovation globally and leads the way in Europe.

We are one of the best places internationally for fintech entrepreneurs to start, scale and grow their business. That’s why the sector is thriving and continues to deliver ground-breaking companies and products, create highly skilled jobs and drive growth that benefits the whole of the UK economy.

While the ‘jewel in the crown’ metaphor may be used by many on the podium this week, we should not let this distract from the job at hand: to retain Britain’s leadership into the 2030s. Here we should all be aware that the path to how Britain retains its crown over the next decade is going to look different compared to how it claimed the title after 2008.

Our global competitors are moving fast. France’s fintechs received €2.8 billion in funding in 2022, up nearly 22 percent from the previous year, amid declining levels in the UK.

France now has 10 fintech unicorns and German fintech investment in 2022 was 70 percent 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 coming years.

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, by 2022, over 80 per cent of UK venture capital investment in the sector went to London-based firms.

Although this is progress compared to previous years, down from 94 per cent in 2020, there is still more to do to ensure the rest of the UK does not miss out on opportunities for growth.

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

Businesses 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, both of which are important partners for international expansion.

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

Perhaps this limited group of investors outside of London is one reason why Beauhurst data shows that 3 out of 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 come further apart.

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

I regularly talk about Scottish fintech’s ‘coming of age’, but to accelerate growth in the years ahead there is a need for initiatives that promote greater awareness of the opportunities for later stage investors outside of London. This is essential to support the ambitions of all our fintech entrepreneurs.

Today’s and tomorrow’s meeting present a decisive health check on whether the sector is doing enough to secure its long-term future after the Kalifa Review. The Government’s ‘Scale-up Britain’ ambitions are a good goal, but our fintech hubs need more capital to go truly global. This mismatch can have significant consequences in the years to come.

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

Thomas Gillan is CEO of Edinburgh-based payments fintech BR-DGE and founder of SIS Ventures. The views and opinions expressed are not necessarily AltFi’s.