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Brexit worries caused UK VC investments to slow down in the first quarter

Written by Angus Shaw on Wednesday, 11 April 2018. Posted in Investment

While Q4 ended on a high note, concerns about Britain’s transition deal with the EU caused VCs to tread carefully in the first three months of 2018

Brexit worries caused UK VC investments to slow down in the first quarter

2017 was nothing short of a stellar year for VC investments in Blighty, given that the fourth quarter alone raked in a near record-breaking $2.8bn and generated an annual $8bn worth, according to KPMG Enterprise, the investment company. However, the first quarter set 2018 off to a sluggish start.

At the face of it, things may initially not look too bad. In no small part thanks to the big rounds raised by the likes of Gousto and eToro, investment in the UK ecosystem edged just over the $1bn mark and made up a significant chunk of the $5.2bn invested in Europe. While the last quarter of 2017 saw British startups raise seven of the top ten European deals, it only scraped in one out of ten in the first quarter of 2018. Moreover, Blighty’s results pale in comparison to the startups in the United States that raised a grand total of $28.2bn. 

Looking for potential reasons behind the UK slowdown, the researchers noted that many investors felt uncertain due to Britain’s deadline for reaching a transition deal with the EU. The deal was signed in mid-March and was broadly welcomed by British startups. It ensured a 21-month transition period during which the UK will enjoy the benefits of free movement and will remain under EU rules but won’t have any rights to comment on new regulations. 

Commenting on the findings Patrick Imbach, head of KPMG’s startup practice, said: “Despite the trend in the number of deals in the UK continuing to drop, we can see that investors are clearly focused on making a smaller number of later stage deals.”

“As the UK startup ecosystem has matured, a lot of later-stage startups have shifted their focus from growth to profitability, particularly in the fintech space. Now we are seeing some fintechs succeeding; they are delivering on profitability objectives and positioning themselves for potential exit over the next one to two years.”

Hopefully, with the ink drying on the transition deal, things are looking brighter for startups looking for investment in Q2. 

About the Author

Angus Shaw

Angus Shaw

With a keen eye for politics as news editor of his university’s publication, Angus can often be found scanning the horizon for the next big waves crashing against business shores. To hone his skills, he has taken on the mantle of editorial intern with Elite, which makes up the time when he's not studying or setting sail at Radio Caroline, the former pirate station.

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