business

Brexit and Powa blamed as Britain’s finance crown wobbles

By Oliver Smith 26 May 2016
The flag of the European Union, where hopefully roaming charges will become a thing of the past.
Summary

Investment and excitement is being replaced by fear and uncertainty.

Last year Britain stood tall as a leading light in the world of financial technology, but 2016 might not be so kind to Europe’s booming billion-dollar fintech capital.

The looming threat of Britain exiting the European Union, as well as the high-profile collapse of one of London’s rising stars in the world of fintech, are spreading fear and uncertainty among investors and small businesses, according to KPMG.

Powa, reportedly valued at over $2.7bn by investors last year, imploded in February after a string of failures and mismanagement left the company bankrupt.

“After the collapse of former UK payments unicorn Powa, funding to [venture capital]-backed UK fintech companies fell 41% on a quarterly basis,” wrote KPMG in its Pulse of Fintech Report covering the first three months of 2016.

Referendum woes weigh

Meanwhile, Britain’s upcoming referendum on 23 June on our continued membership of the European Union is the key factor leading to a sharp drop in investment according to the report.

“The upcoming Brexit referendum… in particular, may have hindered fintech and M&A [mergers and acquisitions] volumes to some degree in the first quarter, as investors wait to see whether the UK will leave the European Union,” wrote KPMG.

As we reported in March, 2016 is turning out to be a perfect storm of bad news, not just for fintech, but for UK startups as a whole.

Silicon Valley Bank found that Brexit, funding problems, a global stock market slowdown and skills shortages were all dampening the optimism of Britain’s small digital businesses.

Read more: 2016 – A perfect storm of bad news for UK startups

But it’s not all doom and gloom, KPMG’s report also found that despite the current downturn, Britain remains Europe’s top destination for investments in financial technology businesses.

In the first three months of 2016 peer-to-peer mortgage provider LendInvest (£17m), challenger bank Starling Bank (£47m) and housing investor Property Partner (£16m) all raised significant amounts of money to continue their growth.

Read KPMG’s Pulse of Fintech Q1 report in full here.