North’s fintech sector ‘facing uncertain future’

The North’s fintech sector faces an uncertain future, with two fifths flagging the potential risk of failure by the end of 2023.

That’s according to new research commissioned by specialist business advisory firm FRP  – in a poll of businesses in the fintech hubs of Manchester and Leeds, FRP found that more than two-fifths (42%) of businesses in the sector weren’t confident of their ability to trade through the next six months, as challenges relating to inflation and interest rates persist.

While just under a quarter (24%) of firms saw their valuations to have fallen in the last year as they contended with rising input costs, the region had the largest proportion of firms that had seen their valuations increase (56%) of any UK nation or region surveyed.

The North also had the lowest proportion of firms that expect their valuation to decline over the next year (24%), and the highest proportion of firms that expected to see their revenue growth accelerate (42%).

Against a backdrop of rising interest rates, just under a third (30%) have found funding harder to come by over the past 12 months. However, a larger proportion (46%) report accessing financing with greater ease.

With some firms anticipating future challenges, the research highlighted a polarisation in plans for the future. More than two-thirds (64%) of the business leaders FRP polled said that they had reviewed and amended their exit strategy in the past year. The most popular option was planning to seek new consolidation (60%), followed jointly by seeking new funding or investment or acquisition opportunities (38%).

Daniel Brecker, corporate finance director at FRP in Manchester, said: “From a fintech perspective, Leeds and Manchester are hugely exciting places to be at the moment. They represent an accessible alternative to London, with lower start-up costs and an excellent pipeline of talent.

“Of course, the North isn’t immune to the financial challenges that all UK businesses are currently living through, and we can see that the fear of failure is elevated across the country. Still, despite the challenging conditions, firms in the North are more bullish when it comes to valuations, revenue growth and access to funding, so the future looks bright.

“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.”