Two fifths of Scots fintechs uncertain of surviving to 2024 - but sector's underlying 'resilience' praised

The underlying strength of Scotland’s fintech sector has been defended after a new report found that two fifths of relevant firms say they could fold by the end of 2023, although the level is nonetheless the lowest in the UK.

Michelle Elliot, partner and restructuring specialist at FRP in Glasgow, praises Scots fintech firms' 'spirit of enterprise and ambition'. Picture: Chris Watt.

The finding has come about due to specialist business advisory firm FRP commissioning a poll of businesses in the fintech hubs of Edinburgh and Glasgow, determining the proportion of firms in the sector that weren’t confident of their ability to trade through the next six months amid the challenging economic backdrop.

However, the survey found higher percentages in other fintech clusters covered, with the Midlands coming in at 58 per cent, the North-east (Newcastle and Durham, 56 per cent), London (46 per cent) and the North of England (Leeds and Manchester, 42 per cent).

FRP, which in Scotland has offices in Edinburgh, Aberdeen, Glasgow, and Inverness, said fears are likely to be linked to challenging trading conditions, with just over a quarter of respondents seeing the valuation of their business fall over the past 12 months. Furthermore, more than a third also expect their valuation to decline over the next year.

The oft-cited hurdle of funding is also on firms’ minds, with 36 per cent saying they have found it harder to come by over the past 12 months, although nearly half of those polled said they had been accessing finance with greater ease. Additionally, 70 per cent of the business leaders FRP polled reported having reviewed and amended their exit strategy in the past year.

Michelle Elliot, partner and restructuring specialist at FRP in Glasgow, said: “There’s no denying that fintech firms in Scotland are clearly finding some aspects of life challenging. While many have struggled to grow in the last year and, for many, it’s proving harder to source funding, we can take heart from the resilience that firms are showing in the face of these conditions.

"It’s still concerning that two in five worry about their ability to trade through the next six months, but that’s the lowest proportion in the UK. That spirit of enterprise and ambition gives me confidence for the future. For those targeting further investment or consolidatory support, the coming months will be crucial in optimising their commercial operations and future profitability to develop the best proposition.”

Dynamic

FinTech Scotland boss Nicola Anderson says: 'Fintech continues to be one of the most dynamic and fast-growing sectors in Scotland and the UK.' Picture: contributed.

Nicola Anderson, chief executive of trade body FinTech Scotland, which is now chaired by Stephen Ingledew, also pointed to a sector with strong prospects, saying: "Fintech continues to be one of the most dynamic and fast-growing sectors in Scotland and the UK, attracting global leading levels of investment.

"Fintechs in Scotland saw record levels of investment in 2022. The current global economic landscape has had a bearing on investment funding, something we are not complacent about. We are committed to continuing to support the fintech founders, leaders and business builders who are determined, ambitious and focused on driving successful businesses that will grow and scale in Scotland and the UK.”

The report also comes ahead of Scotland hosting the sixth edition of its Fintech Festival, which celebrates “remarkable” innovation in the field, from September 21 to October 12 2023.