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Half of UK fintechs fear insolvency before year-end

UK fintechs, close, UK, fintech, year, economic challenges, researchClose to half of UK fintechs fear that they may not make it to the end of the year due to ongoing economic challenges, according to new research.

A survey by business advisory firm FRP found that 48% of the featured UK-based fintechs are not confident of their ability to trade through the next six months, citing the pressure of inflation and rising interest rates.

Confidence is lowest among the smaller firms, with 52% citing the fear of failure; however, even among the more established startups with more than 50 employees, 38%statede that they were at risk.

The survey, which canvassed 250 UK fintechs, showed a mixed picture when it comes to funding. Close to half (41%) said that funding had been harder to come by since the start of the year, while 43% said funding had been easier to access.

Unsurprisingly, given the survey findings, the majority of respondents have reviewed and amended their exit strategies, with most firms putting consolidation as their primary option, while just over a third (35%) said they would be pursuing acquisitions.

Either way, it seems likely that the UK’s fintech market will see a wave of consolidation.

“Interest rates and broader economic headwinds are clearly a challenge, with funders ultimately becoming more diligent in how and where they deploy their capital - particularly with other sectors offering potentially safer bets,” said Dan Conway, partner and restructuring specialist at FRP.

“For those eyeing consolidatory support, the coming months will be crucial in optimising their commercial operations and future profitability to develop the best proposition for would-be suitors or new investment.”

The research comes at the same time as asset managers are expressing their own concerns about their financial viability and likely consolidation. According to a PwC survey, one in six asset managers expects to disappear or be acquired by 2027, a figure which is twice the normal turnover rate.

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