Latest Innovate Finance report reveals decrease in UK fintech investment, but like-for-like increase

Innovate Finance, the industry body for fintech in the UK, has reported a decrease in UK fintech investment in 2022, but confusion over the final annual figures could yet turn that into an increase.

In its latest report, Innovate Finance revealed that UK fintech investment fell to $12.5bn in 2022, 8% less than in 2021. But this is actually higher than the figures given in its report for the same period in 2021, as reported by Computer Weekly, when the organisation revealed that UK fintech investment was $11.6bn, which it said was a record high for a year.

Computer Weekly asked Innovate Finance about the discrepancies. It said the figure for 2021 increased after 31 December, when data on more agreements or expanded deals in that year emerged, with nearly $2bn added to the total, taking the 2022 figure to $13.5bn.

“We strike the data as of 31 December each year, sourced from Pitchbook’s dynamic database of deals,” said Innovate Finance. “Pitchbook continues to add deals to its database every day when it receives new information and so the year end figure is always subject to change.

“As 2022 progressed, the reported 2021 investment volume increased as Pitchbook received further information retrospectively about 2021 deals. For example, deals that upsized or deals that were not reported prior to 31 December will increase the total volume reported as of 31 December. The revised 2021 investment volume [for UK] is $13.5bn (from $11.6bn), and the 2022 volume of $12.5bn [for 2022] is an 8% decrease from this number.”

This figure is therefore not like-for-like, and a similar increase in deals added for the end of 2022 would lead to an increase in spending in 2022, rather than a decrease.

Innovate Finance added: “A like-for-like comparison might be relevant if the data changed by a consistent proportion every year, but there is no such relationship. For example, given the decline in volumes through 2022 and the market slow down, it is quite possible that the 2022 figure will not change much during 2023, although of course we can’t predict this. What we know for sure is that 2022 volumes (current data) were 8% below 2021 volumes (current data). We believe it would be both incorrect and misleading to compare the 2022 volume today with the 2021 volume 12 months ago, which would indicate that funding had increased by 8% year-on-year.”

The UK figures for 2022 also revealed a dramatic reduction in the second half of the year, if compared with the numbers given in the year’s halfway mark. In July, Innovate Finance reported that investment had increased by 24% and reached $9.1bn in the first six months of 2022, compared with the same period in 2021.

This would put investment for the second half of 2022 at about $3.5bn. Investment in fintech was nearly $6bn in the second half of 2021. According to the figures published by Innovate Finance the first six months of 2021, UK fintech received $5.7bn of investment, which reached $11.6bn by the year’s end.

Commenting on the latest findings, Janine Hirt, CEO of Innovate Finance, said: “UK fintechs are holding the fort in securing great levels of investment in challenging economic times, a testament to the resilience and strength of our sector. 

“Our latest report shows that the UK is still receiving more investment in fintech than all of the next 10 European countries combined, and remains second in the world only to the US. We must continue to work together with industry, the government and regulators to build on this momentum and maintain the leadership of the UK as a global centre to start, scale and grow a fintech business.”

Paul Scully, digital economy minister, said: “Despite global headwinds, British fintech firms showed great resilience last year, and helped boost the UK’s status as a world leader in tech – delivering jobs and huge benefits for our economy.

“In 2023, we are focusing on maintaining that lead by supporting startups, boosting digital skills and making this country an even more attractive destination to found, grow and invest in tech businesses.”