Investors flock to the UK’s tech ecosystem

• Fast-growing UK IT companies raised £24bn this year.
• It brings UK tech firms’ five-year total to £97bn.
• Capital has been harder to come by this year as interest rates have climbed.

While there has been much alarm over the City’s competitive position this year – with Amsterdam overtaking London as Europe’s top share trading location and the French stock market overtaking that of the UK – new data reveals the UK’s IT sector continues to outpace its European peers.

Fast-growing UK IT companies raised £24bn this year, more than France and Germany combined, according to Dealroom.

It brings UK tech firms’ five-year total to £97bn.

Capital has been harder to come by this year as interest rates have climbed and investors have become more cautious of the tech sector.

Dealroom’s calculations suggest the UK’s tech industry is now worth $1trn, making it the third country behind the US and China to reach this milestone and cementing it as the top European innovation environment.

Germany’s tech sector is worth $467.2bn and France’s $307.5bn.

The UK’s tech sector attracts more venture capital than its European competitors and creates more value for investors.

Since the turn of the century, the UK has generated 144 ‘unicorns’ – start-ups valued at more than $1bn – and 237 ‘future corns’ – companies valued at more than $250m and on track to become unicorns.

Last year there were 116 unicorns and 204 future corns.

“UK tech has remained resilient in the face of global headwinds, and we completed the year as one of the world’s leading digital business locations,” said digital minister Paul Scully.

This reflects our pro-innovation approach to tech legislation, support for start-ups, and goal to enhance digital skills.”

The numbers show the UK’s growing appeal to overseas VCs.

General Catalyst, Sequoia Capital, and Lightspeed, which all built UK operations last year, have added workers this year.

New Enterprise Associates, a 45-year-old US venture financing firm, and Berlin-based Earlybird have joined them in the UK this year.

UK-based funds raised £9.2bn this year to assist fast-growing enterprises and start-ups, marginally ahead of 2021’s total.

General Catalyst’s Chris Bischoff said: “We established a presence in London since the UK has a strong ecosystem.

Our 18-month experience with this ecosystem has helped us uncover and support early-stage firms trying to accelerate change in their industries.

“Our values of responsible innovation and radical cooperation match the UK’s innovation approach.”

Dealroom data suggests that innovation is spreading across the UK.

Bristol, Cambridge, Edinburgh, Leeds, London, Manchester, Nottingham, and Oxford have two or more unicorns.

Some of these are challenging US IT ecosystems in specialized fields. Cambridge is the world’s third most important science hub, behind San Francisco and Boston. Fifth was Oxford.

Cambridge has produced the most successful tech founders, with more than 500 alumni raising at least $10m.

Oxford, Bristol, Nottingham, and London universities joined Harvard and MIT in the top 20 globally (MIT).

In a tight labor market, the UK tech sector is increasingly hiring entry-level workers. In November, Adzuna reported 15,000 entry-level IT roles, up from 6,596 in November 2017.

This has led to the rise of ‘edtech’ start-ups that teach coding and cyber security to help people develop successful tech careers. Euan Blair, son of the previous prime minister, established Multiverse, the UK’s first tech unicorn.

Code First Girls aims to increase the number of women in tech.

Code First Girls’ CEO said: “Every day, the UK launches and scales fantastic tech firms, from AI to healthcare inequity to space missions.

“Too few women work for these important start-ups because they weren’t encouraged to pursue a tech profession or gain crucial skills.

We intend to teach 26,000 women in the UK over the next five years and place them in tech roles so they can improve the sector.

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