Friday August 4, 2023

In our latest article, we explore key findings from our report through the lens of Scottish fintechs

According to our research report, the fintech sector in Scotland is facing a challenging future with fintech businesses anticipating turbulent times ahead. However, our findings also show that there are positive opportunities for the industry.

We surveyed businesses in the fintech hubs of Edinburgh and Glasgow and found that two fifths (40%) of firms fear the potential risk of failure by the end of 2023 amid rising inflation and interest rates. However, this was the lowest proportion of the UK regions and nations surveyed, which also included fintech clusters in the Midlands (58%), the North East (Newcastle and Durham, 56%), in London (46%) and the North (Leeds and Manchester, 42%).

The fears are likely to be linked to challenging trading conditions, with just over a quarter (26%) seeing the valuation of their business fall over the past 12 months, as they continued to contend with rising input costs – the highest proportion recorded. Over a third (34%) also expect their valuation to decline over the next year.

With a high proportion of firms concerned about their futures, our research highlights a polarisation in the market in terms of funding – suggesting a fight for quality amongst angel investors, venture capitalists and lenders. Against a backdrop of rising interest rates, nearly two in five firms (36%) have found funding harder to come by over the past 12 months, with just over two in five (44%) accessing finance with greater ease.

This polarisation is also apparent in firms’ plans for the future. Seven in ten (70%) of the business leaders we surveyed said that they had reviewed and amended their exit strategy in the past year. The most popular option was planning to seek new funding or investment (46%), followed jointly by seeking new consolidation or acquisition opportunities (40%).

Despite the challenges facing fintech firms in Scotland, most notably growth as a result of lesser funding opportunities, the region remains resilient. Out of all the regions surveyed, Scotland was the lowest proportion of those concerned about their ability to trade through to the end of the year evidencing the regions spirit of enterprise and ambition.

For those targeting further investment or consolidatory support, the coming months will be crucial in optimising commercial operations and future profitability to develop the best proposition.

To read more of our findings and insights into the future of UK fintech, click here.

Click below to read the report

A fork in the road: The future of UK fintech