Advisory firm research highlights Scottish fintech firm fears

Two-fifths of Scottish fintech firms have warned of potential failure by the end of the year, according to new research by business advisory firm FRP.

The fears are fuelled by challenges brought on by high inflation and interest rates. The report shows that 40 per cent of firms in Edinburgh and Glasgow are concerned that they won’t be able to trade in the next six months.  

The worrying figure is the lowest of any region in the UK, however. 58 per cent of fintech businesses in the Midlands fear for their existence, while 56 per cent of North East-based firms are uncertain of their future. London-based and Northern (Leeds and Manchester) firms are also showing more concern than Scottish fintechs.

The report suggests worries correlate with current trading conditions. A quarter of fintech firms reported a decrease in their business valuation over the past year, attributing it to rising input costs. A third expect their valuation to dip again in the next 12 months.  

Companies were split over the difficulty to acquire funding over the last year. 36 per cent of businesses reported gaining funding has become increasingly challenging, while 44 per cent found it easier.  

Close to three-quarters of business leaders who were polled indicated a revision in their exit strategy in the last 12 months. The top suggested strategies included seeking new funding and pursuing consolidation or acquisition opportunities.

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.”