Fintech Investment in the UK: Miracle or Mystery?

Even though Brexit problems remain unsolved and many business sectors in the UK are suffering from this uncertainty, British fintech firms seem to be unaffected by this [1]. Those firms attracted a record high of £1.34 billion in venture capital funding in 2017, followed by an 18% increase in 2018. This record meant the UK overshadowed the rest of Europe and retained its spot in the top three for fintech investment, behind China and the US. The three reasons below might explain this seemingly mysterious phenomenon:

1. Favourable Regulatory Environment

The survey conducted by Ernst & Young suggested that the UK is the most fintech-friendly jurisdiction worldwide [2]. As a financial regulator whose objective is to promote innovation and competition, the Financial Conduct Authority (FCA) launched initiatives such as “sandbox” to create a controlled environment for businesses to test innovative products without immediately incurring regulatory consequences.[3] Another example is the Innovation Hub which is to provide tailored regulatory support for innovative firms without charge.[4] Those initiatives would help reduce the compliance costs and consultant charges facing fintech start-ups, allowing investors’ money to be well spent somewhere else.

2. Increasing Number of Unicorns

Investors crave for the chance of earning big profits, which might help explain their passion of investing in the UK — a hotbed for fintech unicorns (companies with a billion dollar valuation). Even though the causal relationship between the odds of becoming a unicorn and the easy access to funding seems a bit tricky, it should be noted that an early-stage fintech company needs more than capital investment to scale up. Factors like the supply of talents and market conditions are equally important. With the strong ability to attract tech talent [5] and the growing consumer fintech adoption rate within western countries, there is no wonder why 7 over 29 fintech unicorns are headquartered in the capital of the UK.[6]

3. Smooth Takeover Exit

A stumbling market might deter companies from going public in case of hostile takeovers, which would disillusion investors who expect to exit through initial public offerings at the first place. Nevertheless, as an alternative way to exit, takeovers appear to be fairly smooth in the UK. Despite the fact that the UK Government announced a proposal in 2018 that enables the government to interfere with foreign takeovers which gave rise to national security concerns, UK regulators tend to be fairly relaxed regarding terminating deals for this reason. A good example is Ant Financial’s takeover of a major British FinTech company World First. While the former’s proposal of acquiring a similar firm MoneyGram was terminated by the U.S. government due to national security concerns, the deal with World First was successfully closed.

Although it seems impossible to create a parallel world without Brexit and see whether UK fintechs would attract even more investment in that scenario, it can be concluded that the economic stress brought by Brexit has been to some extent relieved by the boom in fintech investment.

About the Editor: Shiyi Huang is a Masters candidate in Law and Finance at University of Oxford, and is a research member of Oxford Fintech & Legaltech Society. Previously she was a lawyer at Zhong Yin Law Firm in China where she helped design transactional structures and draft legal documents for international M&As. Shiyi is a licensed lawyer in China, and qualified to engage in China’s securities and funds market. Her research interests include corporate finance, cross-border investment, banking law and securities. You can contact her at

Credits: Photo by Josh Calabrese on Unsplash






[6] Robert Walters, Fintech Market Report, published in April 2019.

Oxford Fintech & Legaltech Society —