The UK saw fintech investment collapse in 2022, but remains the world leader
The UK fintech sector saw a steep drop in investment last year but remained a top-three global destination for capital.
Investments in UK fintech by private equity and venture capitalist firms fell 56% in 2022, compared to the previous year, reaching $17.4 billion compared to $39 billion the previous year, according to KPMG.
In his last Pulse of fintech The report said KPMG investment in the second half of 2022 was much lower than the first six months as “higher interest rates and inflation together with downward pressure on valuations dampened investor appetite”.
There were 593 private equity and venture capital fintech deals in the UK in 2022, compared to 724 in 2021.
Despite the fall in investment, KPMG’s UK head of financial services, Karim Haji, said it was a strong year for the UK fintech industry. “The UK is a major global player, with investment in UK fintech second only to the US and Australia,” he said.
Investments with UK fintechs attracted more funding than those in the rest of Europe combined.
Haji said 2022 was “a tale of two halves” with significantly more investment and deals in the first half of 2022 than the second half. “The variance highlights the shift in investor sentiment in the face of mounting geopolitical challenges.”
A total of $11.8 billion of investment was received in the UK during the first half of the year, with 365 deals, compared with $5.6 billion of investment and 228 deals in the second half.
Global investment in fintech last year, including mergers and acquisitions, private equity and venture capital was $164 billion, compared to $239 billion in 2021, which was a record. There were just over 6,000 deals last year globally, compared to more than 7,300 in 2021.
Anton Ruddenklau, global fintech leader at KPMG International, said: “We are seeing an incredible amount of interest in all kinds of fintech companies, with record funding in areas such as blockchain and crypto, cyber security and wealth technology. While payments remain a significant driver of fintech activity globally, the sector is expanding every day.”
Cutbacks
The fintech sector, which has attracted huge investment in recent years, is cutting back amid challenging market conditions.
Fintech giant PayPal has said it will cut 2,000 jobs – about 7% of its workforce – as it expects the current challenging economic conditions to continue.
Earlier, US fintech firm LendingClub also announced cuts, with 14% of its workforce set to go as high interest rates stifle demand for lending services. Meanwhile, UK payments infrastructure fintech firm Paddle is reducing its workforce of more than 350 by 8% as a boost until the business during the Covid-19 pandemic ends.
The UK fintech sector was recently supported by the government as a future growth industry. In a recent statement on the UK fintech sector, Paul Scully, minister for the digital economy, said: “Despite global headwinds, UK fintech firms showed great resilience last year, helping to boost the UK’s status as a world leader in technology – and delivered jobs and huge benefits to our economy.
“In 2023, we focus on maintaining this leadership by supporting startups, increasing digital skills and making this country an even more attractive destination to establish, grow and invest in technology companies.”
