UK tech investment hits record levels

Despite Brexit, the UK’s tech startups attracted more investment from venture capitalists last year than any other country except for the US and China, according to the 2021 annual report from Tech Nation.

David Sapsted

18 March 2021

The nation's startups and scale-ups are now valued at $585 billion, more than double their worth in 2017 and twice the value of of the sector in Germany, Europe's second most valuable startup ecosystem.Tech Nation, a government-backed organisation created to support tech entrepreneurs, said UK startups raised a record $15 billion in venture capital (VC) last year, $200 million more than in 2019 - itself a record year - and widening the gap with Germany and France. Only the US ($144 billion) and China ($44.6 billion) raised more in VC last year.The annual report also found:

an increase of 17 per cent in deep tech investment, the highest rate of growth anywhere in the world.
overseas investment increased from 50 per cent of the total in 2016 to 63 per cent last year.
impact tech investment had increasing 160 per cent between 2018-20, compared to the US, where it grew 15 per centt during the same period.
London ranks fourth in the world for tech VC investment, behind San Francisco, Beijing and New York.

Max Chen, digital adoption policy manager at the industry group techUK, commented: "The report shows that despite a hugely challenging year, technology and the UK tech sector has played a major role in helping the UK to adapt to the impacts of the pandemic while also helping to support economic growth and employment."As we turn to the recovery, ensuring we continue to get the right legislative and regulatory framework to support the continued growth of the UK tech sector will be vital not only for our economy, but also to build a more resilient, productive, and green economy."

However, the report also warned that the sector’s increasing reliance on foreign investment possessed the potential for national security concerns and highlighted “a shortfall of late-stage domestic investors”.Tech Nation also expressed concerns that London was increasingly becoming the go-to place for tech entrepreneurs and investors, leaving other regions in the country behind. Of the total VC investments made into the UK in 2020, 88 per cent went into businesses based in the capital, up from 73 per cent in 2018.While recognising London’s importance as an innovative hotbed for entrepreneurs, Tech Nation warned that the UK’s position as a tech world leader was due to “the collective strength of its regional tech clusters” and recommended that targeted regional investment funds be introduced “to level the funding playing field for companies outside London".