Following the Brexit vote in June, there has been a significant drop in venture capital funding in London, prompting some to think that the city could lose its position as the FinTech capital.
According to a report from the Financial Times, new figures released show that funding in the FinTech sector dropped in 2016. Innovate Finance, the U.K.’s financial technology trade body, found that since Brexit venture capital funding dropped as FinTech companies in the U.K. deal with the Brexit effects.
Innovate Finance reported that, globally, venture capital funding for FinTech companies grew around 150 percent in the first six months of 2016, amounting to $13 billion of investment compared to $5 billion in the same period in 2015.
When it came to U.K. companies, venture capital funding decreased by a third. The Financial Times reported that in the first six months of 2016 funding had dropped to $386 million compared to $580 million from the same time last year.
A Blow to London’s Efforts
The news that London is struggling to remain as the top spot for FinTech companies will come as a surprise to many.
In August, the U.K.’s Financial Conduct Authority (FCA) was reported to be thinking about approving a number of blockchain companies in a bid to encourage U.K. businesses to use the technology. With London considered a prominent location, the FCA are keen to provide the ideal environment for FinTech companies. As such, they recently accepted 24 out of 69 applications as part of its FinTech sandbox.
Despite the U.K. being considered a haven for FinTech companies, it was China who attracted more venture capital funding for FinTech companies in the first six months of the year, beating the U.S.
London Still a FinTech Hub?
Even though many think that China is quickly showing its competitive side to FinTech companies in the U.K. looking for funding, there are others who believe London is still the top spot for FinTech startups.
A report from the Financial News, revealed last month that the Brexit vote had not had any impact on London’s position as the ideal place for startups to open their businesses.
At a Financial News Brexit Breakfast, a panel discussed the implications that Brexit could have on London in the future.
However, while some said that Berlin could prove a competitor to London as the next top spot, others stated that due to the city’s innovative regulator and a large pool of talent within the FinTech sector, London remained at the top.
Ophelia Brown, a general partner at venture capital fund LocalGlobe said, regarding Berlin taking over, that:
The rival that everyone points to is Berlin. People don’t start speaking German overnight. I don’t see it significantly moving ahead of London.
One issue that was prevalent at the panel discussion was whether or not FinTech talent would have the right to move freely around the U.K. from the EU. The panellists, though, said that these concerns had simply been taken out of proportion.
Anne Boden, the chief executive of Starling Bank said:
The practical implications of starting a financial services business in Europe are far greater than just passporting.
She added that large startups that are able to support an expansion internationally would find ways of being regulated within the EU.
Whether or not London loses the top spot as a FinTech hub remains to be seen; however, for now, it seems as though London is the place to be for startup companies to flock to.
Featured image from Shutterstock.