Bullish UK technology sector ‘riding out Covid storm’

technology_11The UK’s technology sector has come out fighting following fears of a Covid-19 meltdown – especially for start-ups – with a new study showing that British firms are continuing to attract huge investment, still have plenty of well-paid jobs on offer and are in great shape to navigate the crisis.

Figures compiled by Tech Nation and Dealroom for the virtual event of London Technology Week, show the capital continues to lead the way and is now established as a global tech leader, with London-based companies raising £3.2bn since the start of January, more than Paris, Stockholm, Berlin and Tel Aviv combined.

Across the UK, tech firms raised a total of £4.2bn, compared to the rest of Europe on £3.2bn.

Fintech dominates fundraising, accounting for 39% of the 2020 total so far, while enterprise software companies raised a fifth of the money invested in the first five months of the year.

Even so, with many of these deals agreed in principle before the onset of the virus, capital inflows in the second half of the year are unlikely to be as strong as those in 2019, itself a record year.

However, in April, the Government stepped in amid concerns that tech start-ups would be hit hard by the crisis, launching its Future Fund of £250m of matched funding, so firms could access support. The British Business Bank has already approved 53 convertible loans, with a value of £55.9m, following 533 applications to date. Small and medium-size businesses focusing on research and development will also benefit from £750m of grants and loans.

Tech Nation chief executive Gerard Grech said: “Many businesses are adapting and innovating to support the fight against coronavirus, demonstrating the resilience and resourcefulness of the UK tech sector. Although we are seeing many tech companies closing key rounds of funding, the picture is being monitored closely at Tech Nation, especially across different parts of the country, where access to finance may not be as strong. These findings today confirm that the UK is well-positioned to face the challenges that lie ahead and leave Covid-19 in a position of strength.”

Over the past 12 months, UK tech has built on a decade of consistent growth in which more unicorns were created than in any other country. Since last year’s London Tech Week, seven more companies have achieved ‘unicorn’ status – a privately-owned tech business with a value of at least $1bn – taking the UK’s total to 79 – twice the number of unicorns produced by second-place Germany, on 32.

Similarly, the UK has 109 potential unicorns compared to half that number in Germany (58) and France (57). On a city level, London has 66 potential unicorns, 80% more than its nearest competitor, Paris (36).

UK tech now employs more than 2.93 million people across the country with salaries that are, on average, £10,000 higher than other sectors. Salaries climbed between 3% and 9% in most tech clusters in 2019, with Bristol seeing salaries on average 13% higher.

Advertised vacancies were continuing to climb at the start of 2020 before Covid-19 and lockdown took its toll. Even so, more than 90,000 tech sector jobs were being advertised at the end of April. This is twice the number of openings in accounting and finance, the next sector with the most vacancies.

Although London still has the most digital tech jobs and growth – accounting for 53% of advertised roles in 2019 and offering the highest average salaries – the regions are continuing to thrive. The report points to Bristol unicorn Graphcore, which raised £118m in February, Partnerize of Newcastle raising £39m in January, Fintech 2.0’s ANNA Money of Cardiff raising £16.5m in May and Peak, of Manchester raising £9.3m in April.

The report’s findings also show that the UK – which has established leadership in fintech, deeptech and artificial intelligence – is seeing other sectors gaining in traction, including health, energy and education.

Another strength is the UK’s thriving venture capital tech community. From January to June 2020, new funds amassed £3.9bn, almost as much as the £4.2bn raised throughout the whole of 2019.

Since 2018, the UK has had more investment from the US and Asia than any other country in Europe, with foreign investment making up 67% of the UK’s total investment. The UK also has a strong foundation of domestic investment (38%) which, the study insists, underpins its attractiveness to global investors. In contrast, Germany’s tech sector is only 28% funded from domestic investors, which could be a weakness in the months to come.

AI Council chair Tabitha Goldstaub, who is also co-founder of CogX, said: “At a time when we are relying more than ever on technology and entrusting it with significant amounts of personal data, the UK has an advantage in that we have already put in place strong foundations to make to ensure the UK is the place for safe, ethical and trusted AI.

“We need to get this right, both to fight the current pandemic and because of the benefits for the UK in the long-term, putting us at the forefront of pioneering this new technology which can have a transformative impact on our healthcare and our economy.”

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