Tech companies are growing at more than double the rate of the UK economy at an annual 4.5 percent, according to Tech Nation’s 2018 report – with the digital tech sector now worth £184 billion to the economy, up a massive £14 billion in a year.
London has secured its position as the world’s “third global startup ecosystem” meanwhile trumping Berlin, Tel Aviv and Shanghai, but not quite catching Silicon Valley and New York City, the report emphasised, with its international customer base a particular strength: 33 percent of its tech company customers are based outside the UK, compared to a 30 percent for Silicon Valley and seven percent in Beijing.
Yet the report also highlights an increased regional tech presence, with the report emphasising that the tech industry is powering the growth of local economies across the UK, including in areas like Guildford, Aldershot, Slough and Heathrow – suggesting that the UK has emerging “digital suburbs”. This finding challenges the conventional view that UK tech activity is based in large cities.
The findings were welcomed by Prime Minister Theresa May, who pledged that the government would “continue to invest in the best innovations and ideas, in the brightest and best talent, and in revolutionary digital infrastructure.”
Deal Size Soars
Jobs within digital tech also grew at five times the rate of those of the broader UK economy, while deal size mounted. The report follows a bumper year that saw a swathe of major fundraisings and acquisitions, with Silicon Valley investment in the UK tech scene topping £1 billion for the first time.
“Total investment and number of deals in digital tech companies have risen significantly since 2012. From £984 million in 2012, spread over 870 deals, to £3.3 billion in 2016 over 2645 deals – both deal count and investment have more than tripled over the four year period”, the report highlights.
According to Pitchbook figures, British digital tech companies raised more than £4.5 billion in 2017 although London tech firms attracted £2.45 billion in venture capital funding. There were also some big exits for British tech companies in that year.
Matchesfashion.com (acquired by a private investor for almost £750 million) and Callcredit.com (acquired by TransUnion for £1 billion) were a few notable names that exited the British tech sector. The UK has overseen £42 billion venture-backed exits within a four-year period during 2013-2017.
Alongside the tech firm exits, there has also been many ‘mega funding’ rounds during 2017 for some of the UK’s biggest tech companies including Improbable, Deliveroo, Skyscanner, Benevolent.AI and Darktrace to name but a few.
Some of the companies that originally were startups (Just Eat, Zoopla and Purple Bricks) are now worth billions of pounds. US investor Silver Lake announced on Friday 11 May 2018 that it was to buy the house prices firm Zoopla for £2.2 billion, underlining the potential of the UK tech industry.
Matt Hancock, Digital Secretary said of the report’s findings: “This is a huge success story, and we are working hard to make sure the benefits of digital technology reach every corner of the country as we build a Britain that is fit for the future.”
Brexit was also a major topic that was discussed of the UK tech industry’s growth as cities such as Cambridge and London are going to find it challenging when Britain leaves the European Union. Roland Emmans, Head of Technology Sector for HSBC highlighted that tech firms were largely unaffected by Brexit.
Roland said: “Tech firms are refusing to be distracted by Brexit. While technology was one of the most anti-Brexit sectors in the run-up to the EU referendum, our tech customers are now taking a ‘que será, será attitude.”