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Fintech retakes top spot for UK startup investment

Fintech retakes top spot for UK startup investment

Fintech is once again the UK’s best-funded startup sector after climate tech secured the most investment in 2023.

In the first quarter of 2024, UK fintech companies raised $1.4bn across 73 rounds, according to data from Dealroom and HSBC Innovation Banking.

Fintech funding rounds over the period include £340m raised by challenger bank Monzo and the £18.8m raised by Manchester-based AccessPay.

Fintech has historically been one of the UK’s leading technology sectors. However, last year climate tech startups accounted for nearly a third of all investment raised.

More broadly, startup funding levels stabilised in the first quarter, with total levels of investment standing at $3.9bn – the highest in Europe. However, it remains down on the $4bn raised in the first quarter of 2023 and significantly lower than the $12bn peak in the first quarter of 2022.

It follows declining levels of startup investment since the second half of 2022 as macroeconomic factors, such as rising interest rates, caused investors to take a more cautious approach.

The second-best funded tech segment was enterprise software, which attracted $713.9m in funding. There was also notable growth in so-called ‘frontier’ technologies. Semiconductor companies raised $314.7m in the first quarter, while quantum computing startups raised $300m – making both among the top-funded segments in the quarter behind only challenger banks.

London-based startups continued to attract the lion’s share of investment. However, there was significant growth for businesses based in Edinburgh, which attracted 406% more investment compared to the first quarter of 2023. Similarly, businesses based in Brighton attracted 209% more investment.

“This data reflects a busy start to the year for the UK innovation ecosystem – from growth in investment in established and emerging areas like fintech and quantum computing to expansion of regional tech hubs across the length and breadth the country, there is much to celebrate,” said Simon Bumfrey, head of technology and life sciences at HSBC Innovation Banking UK.

“We remain optimistic and excited about UK innovation in 2024 and are committed to supporting and partnering with innovators, investors and the broader ecosystem.”

Technology Minister Saqib Bhatti said: “With companies like Monzo leading the charge, Britain’s leadership in fintech has long been key to drawing in investment from around the world.

“These findings show that investors are also meeting our ambition on technologies like quantum and semiconductors, which lie at the heart of our strategy to make the UK a science and technology superpower.”