Fintech has regained its top spot as the UK’s number one investment magnet according to a joint report published by Dealroom and HSBC Innovation Banking.

The report examined the venture capital investment landscape in the UK during Q1 2024, finding that UK startups raised $3.9bn. This marked a stabilisation for UK VC investment ‘following a sharp global reset from H2 2022’, the report outlined.

This investment included $279m in pre-seed and seed rounds of under $4m, Serie A rounds totalling $742m, Series C at $715m and six late-stage $100m megarounds totalling $1.4bn.

Venture capitalists have been eyeing up various sectors, but one stood out above all else in Q1 – fintech. Energy had previously been the big investment magnet, with the sector being a hot topic at the moment in the midst of green, renewable and alternative energy surges.

However, fintech is back in the leadership position this year with $1.4bn raised across 73 rounds. The report declared that ‘fintech is back’, although noting that frontier technology segments, semiconductors and quantum computing have also caught investor attention.

Simon Bumfrey, Head of Technology and Life Sciences, HSBC Innovation Banking, said: “This data reflects a busy start to the year for the UK innovation ecosystem – from growth in investment in established and emerging areas like fintech and quantum computing to expansion of regional tech hubs across the length and breadth of the country, there is much to celebrate. 

“We remain optimistic and excited about UK innovation in 2024 and are committed to supporting and partnering with innovators, investors and the broader ecosystem.”

Zeroing in on fintech, three notable names were the subject of some of the UK’s largest funding rounds this year. These were challenger bank Monzo ($430m), payments provider PPRO (€85m) and wealth management firm Flagstone (£108m).

Founded in 2015, Monzo has emerged as one of the UK’s leading challenger banks and has gone from strength-to-strength over the past few years, recording nine million customers this year.

In 2024 alone, the London company received £300m from Google parent company Alphabet prior to the $430m funding round in March noted above. The firm is reportedly set to receive investment from Singapore’s sovereign wealth fund, the Government Investment Corporation (GIC).

Meanwhile, in the payments field, PPRO was the standout company for Dealroom and HSBC after being the subject of the $90.4m late VC funding round in March. However, when compared with the biggest AI funding round a oft-noted trend is seen.

Evohood Labs was the Open Source AI company to receive the biggest funding, gaining $112m in an early VC investment in February. This is $27m more than the funding in PPRO. 

So why is this significant? The notability of this lies in observations made this year around the shifting macroeconomic landscape when it comes to investments. 

In March, John Collison, President of Stripe, and the Payments Innovation Jury’s 2024 report, both observed that AI has topped payments as the main target of fintech investors. The figures in HSBC and Dealroom’s report may provide further evidence of this.

Looking away from sectors and more at geography, it is also noticeable that of the nine biggest funding rounds listed by the report – across all sectors not just fintech – six were London based companies.

The remaining three firms were based in Cambridge (Quantum), Edinburgh (Community Gaming) and Nottinghamshire (Green Hydrogen).  London appears to continue dominating the UK’s investment landscape, and as the city is both the national capital and an international hub for financial services, this isn’t particularly surprising.

That is not to say that regional sectors have not been making progress, however. If we look at fintech alone, significant sectors have popped up across the UK in the likes of Birmingham, Leeds, Manchester, Bristol and Cambridge in England, Scotland’s Edinburgh and largest city Glasgow, and the Welsh and Northern Irish capitals of Cardiff and Belfast.

Additionally, whilst London may have been the location for most companies, funding in the city actually dropped by 18% in Q1. In contrast, Cambridgeshire saw investment rise 59%, Manchester by 26%, whereas Brighton and Edinburgh by a huge 200% and 409%, respectively. 

In contrast, investment fell across the counties/cities of Belfast (9%), Newcastle (9%), Oxfordshire (20%) Sheffield (77%) and Bristol (83%). On the whole though, the UK remains a high-profile destination for VC investment.

Amidst a period of economic uncertainty in the UK with the country having entered a mild recession late last year and inflation remaining high – although falling to under 4% this morning (17 April) – stakeholders, legislators and policymakers may find some relief in the fact that the UK is the number one VC investment hub accordion to this report.

The country received $3.9bn in VC funding in Q1, ahead of $2.3bn in Germany, $1.7bn in France, $1.3bn in the Netherlands and $882.7m in Sweden. However, in a likely election year, whether or not this investment is making an impact on the consumer may be the overriding issue.