LONDON (Alliance News) – Venture capital investment in UK financial technology firms reduced in 2016 due to fears around Brexit despite a global fundraising increase, according to figures from industry body Innovate Finance.

Innovate Finance said in its 2016 review, released Tuesday, that global venture capital investment in fintech rose by 11% in 2016 to USD17.40 billion. However, UK investment was down by over 33% at USD783.0 million.

This still left the UK fintech sector ranked third in venture capital investment behind China and the US. Investment in Chinese fintech firms surged by 84% to USD7.70 billion, overtaking US firms which received USD6.20 billion in venture capital investment, down 13% from the prior year.

By number of deals, the US came top with 650, followed by the UK with 173. China saw 28 deals but was boosted by a number of USD1.00 billion plus mega-rounds of fundraising, including a USD4.50 billion fundraise for Alipay, the online payment affiliate of Chinese e-commerce giant Alibaba.

The UK outfits that attracted the most venture capital investment were mobile-only challenger bank Starling, finance provider iwoca, and robo-adviser Nutmeg. However, there were no major flotations of any fintech firm globally during the year, compared to 2015 which saw London’s largest ever fintech IPO in payment processing company Worldpay Group PLC.

Innovate Finance said UK investment in the second quarter of 2016 “slowed dramatically” compared to 2015, “which many in the community attribute to the general uncertainty in the run up to the Brexit referendum”.

However, the report also noted that eight of the top 20 UK deals closed after the Brexit vote, with total investment after the referendum totalling USD368.0 million.

“The loss of passporting rights will hit fintech payments firms if special provisions to the single market are not negotiated upon leaving the union. However, maintaining and further improving access to global fintech talent has superseded passporting across the fintech community’s post-Brexit priorities,” said Lawrence Wintermeyer, chief executive of Innovate Finance.