Global VC investments dropped to a near five-year low in the first three months of 2024, as per data from PitchBook, as high interest rates dampened risk appetite

Leaders of the UK’s financial technology (fintech) industry are urging the British government to increase tax relief and help them raise more investment, as some executives warn a shortage of domestic investors is holding back the sector.

Trade body Innovate Finance’s “Unicorn Council”, which includes the CEOs of Monzo, Revolut’s UK arm and ClearBank, set out policy recommendations on Monday that it said would help the UK maintain its position as a fintech hub.

Global VC investments dropped to a near five-year low in the first three months of 2024, as per data from PitchBook, as high interest rates dampened risk appetite.

Fintech firms in the UK say there is not enough investment coming from UK-based investors in particular.

There is a well-documented problem with capital supply in both the UK listed markets and private Growth Capital, the group’s statement said.

All of the investment across our biggest fintechs (is) all overseas. Where are the UK pension funds? Why isn’t that growth actually going into the pockets of the UK? added ClearBank Chief Executive Officer Charles McManus, speaking at the Innovate Finance Global Summit (IFGS) conference held in London on Monday.

Innovate Finance CEO Janine Hirt told Reuters that there needs to be more domestic investment in fintech.

We know that actually the pension funds from around the world are investing into UK fintech so why are our own pension funds not doing that? Hirt said.

She added: There is a necessary awareness that has to happen, with the pension sector, about how investing in our own fintechs is good for our own economy and is good for pensioners as well.

The UK government launched the “Mansion House Compact” in July 2023 to help channel cash from DC pension funds into unlisted firms, as part of plans to persuade pension schemes to invest some of their funds in infrastructure and technology.

Still, the finance minister has said that Britain will not compel pension funds to invest in high-growth firms.

Hirt said that the Mansion House Compact has made some progress but that there needs to be more visibility over where pension funds are planning to invest.

The industry group’s recommendations for the government include abolishing stamp duty and implementing “existing plans to address these capital gaps”, the statement said, without giving details.

The government should also expand the scope of business asset disposal relief and provide “a VAT-rebate scheme” for newer fintechs, the group said in its statement.