Tech Nation, March 17, 2020 8 min read
The Tech Nation Report has been the UK’s state of the nation on tech since 2015. Each year the report provides a comprehensive look into the evolution of the UK’s tech ecosystem, exploring the drivers that underpin and power economic growth within the sector.
This year, the report explores the current state of the UK tech sector, how high value scaleups and tech unicorns are fuelling investment, which UK regions are competing on the international stage, and how the UK is leading the way on cutting-edge technologies.
The Tech Nation report is proudly supported by partners Openreach and BNP Paribas Real Estate, who are pivotal in digital transformation through the provision of valuable infrastructure and in championing the UK tech sector. We would also like to thank our data partners Aon.Radford, Dealroom, Pitchbook, Crunchbase and Gsma.
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Digital Secretary, Oliver Dowden, said: “The tech sector is at the heart of our economy and creating jobs and wealth across the country. We are determined to create the conditions digital businesses need to succeed and are investing heavily in gigabit speed broadband, 5G, cyber security, digital skills and research and development.”
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Gerard Grech, Chief Executive, Tech Nation, commented: “These are truly extraordinary times that we are living in. Over the coming months, technological involvement in keeping services going, keeping businesses afloat and keeping people alive will be essential, impactful and exponential. Across the piece, UK tech companies are offering radical solutions. We need to stay responsive, with smart regulation, ever increasing access to growth capital and new markets. Every effort we put in now will repay many times over, as the past few years have already shown.
“In a rapidly changing world, the UK is a shining light for tech entrepreneurs, investors and employees, with jobs in the digital sector now accounting for 9% of its national economy. Some of the biggest UK successes; the 77 so-called tech unicorns, are $1bn valued companies now inspiring others, and there are an additional 95 tech businesses across the UK primed to be scaling over the coming years. The success of these businesses will be grounded in the UK tech ecosystem’s ability to build deeper and broader knowledge networks between various constituents such as experienced investors and entrepreneurs and to truly fuel growth across the country.”
2019 was an incredibly positive year for the UK tech sector. Compared to the rest of the UK economy, digital tech grew 6 times faster than any other industry (the digital tech sector contributed £149bn to the UK economy in 2018, accounting for 7.7% of UK GVA. This is nearly 6 times greater than growth across the economy as a whole, which increased by 1.4%). In 2019 there were 2.9m people employed in the digital tech economy, an increase of 40% from 2017, with the digital tech economy now accounting for 9% of the national workforce compared to 7% two years ago.
Late-stage scaling investment in the UK has boomed over the last year: Series C investment onwards grew by 71%, and Growth Equity (Private Equity) grew by 51%, indicating that the UK tech ecosystem is scaling and companies are ready to take on large sums to enable unicorn style growth. In 2019, 81.2% of investment into UK tech went to scaling firms, compared to 80% in 2018. A ‘scaleup business’ is defined as a company which has seen average annualised growth of at least 20% over three years with 10 or more employees at the start of the period.
Lesley Eccles, Founder & CEO, HelloRelish Inc, commented: “UK tech is well and truly scaling up. Late-stage investment is up 71% from 2018, a testament to the growing maturity of the UK tech sector and to the ambition and talent we have in the UK. With 95 exciting companies coming through the pipeline, I’m looking forward to seeing these companies becoming the household names of tomorrow.”
Fintech remains the UK’s largest tech investment sector with a 100% rise from 2018. 44% of Europe’s Fintech unicorns and companies valued between $250m and $800m are based in the UK.
Eileen Burbidge, Partner, Passion Capital, Chair, Tech Nation, commented: “The latest findings from Tech Nation today evidence the impact the tech sector has on the UK economy. The UK tech sector is growing 6 times faster than the rest of the economy, and we are seeing UK tech companies raise funds from investors all over the world. Fintech continues to be one of the UK’s key strengths, with 44% of Europe’s fintech unicorns and high-value scaleups being located in the UK.”
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The UK is home to 95 companies valued at between $250-$800m in 2019 – the most ever on record – which represents a 27% increase from 2018, and significantly more than the UK’s counterparts: France is home to (61) of these high value scaleups, Germany (46), and Israel (46).
These companies are important as they represent the pipeline of companies that are already disrupting the UK’s tech ecosystem, and show trends and patterns in the development of the UK tech sector. To date these companies have raised £6.75bn and employ 17,475 people.
45% of high value scaleups are based outside of the capital, including in wejo based in Chester, Bybox based in Coventry and Crisp Thinking based in Leeds.
These companies are set to become the tech unicorns of the future. The UK is a world leader in producing tech unicorns – it’s 3rd in the world, behind only the US and China. The UK is home to 77 tech unicorns, tech companies valued at over $1bn, and 8 tech unicorns were created in 2019.
Her Majesty’s Trade Commissioner for Asia Pacific, Natalie Black CBE, commented: “The annual Tech Nation report is the definitive view on UK tech. I am delighted that it continues to show overseas investors backing the UK tech sector as one of the most exciting and dynamic in the world. With 21% of UK tech investment from Asia last year, the opportunity for the UK to grow partnerships in Asia Pacific is exceptional. I am particularly pleased to see UK start-ups with operations in Asia Pacific, like BenevolentAI, join the Future Fifty, showing the global capability of the UK tech ecosystem.”
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UK companies secured a third of the £30.4bn of investment raised by tech companies during 2019 in Europe.
London generated record investment among European cities – £6.8bn in 2019, a 67% increase on 2018, followed by Berlin (£3.5bn), and Paris (£2.4bn).
25% of Europe’s top 20 highest investment tech cities are in the UK – Manchester, London, Bristol, Oxford and Cambridge. Furthermore, Manchester is the fastest growing European tech city, with an increase in investment of £48m to £181m from 2018 to 2019 – representing an increase of 277%.
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In 2019, for every £1 invested into New Technologies (AI, robotics, cybersecurity, blockchain, IoT, virtual reality, and augmented reality) in Europe, 35 pence was invested into UK companies.
Poppy Gustafsson, CEO, Darktrace, commented: “It is fantastic that the UK stands as one of the top 3 countries investing in AI globally. The lifeblood of brilliant technology companies is access to capital and great talent, and Britain has both of these ingredients. Darktrace is a fantastic example of Great British AI proving itself fundamental in solving one of the society’s greatest challenges. Thousands of organizations around the world are using this technology to fight back on their behalf to protect their critical data and systems from crippling cyber-attacks.”
Dr Sarah Wood, Founder, Unruly, commented: “The UK continues to push the envelope when it comes to creating technologies that are reactive to the ever changing world around us. In 2019, we see continued growth in AI, Healthtech and Fintech as well as purpose-driven tech companies coming to the fore, with investment into UK tech companies responding to the UN’s Sustainable Development Goals nearly doubling in the last year alone. I’m excited to see these developments in the UK tech sector, which is testament to the ambition and innovation of tech entrepreneurs right across the UK.”
It’s not just new technologies that are driving change in the tech ecosystem, but also values. Purpose-driven UK tech companies are coming to the fore, with investment in UK tech companies addressing UN Sustainable Development Goals (SDG) almost doubling in the last year, from £1.59bn investment to £3.06bn. UK SDG aligned companies have raised more over the last six years than those in any other European country.
David Richards, Founder, WANdisco, Board Member, Tech Nation, commented: “As the Founder of WANdisco, and a board member at Tech Nation I am proud to see the tech ecosystem flourish in thriving tech hubs right across the country. The Tech Nation report 2020, rightly recognises the UK as a centre for tech excellence, providing startups with the talent, investment and know-how to grow in the UK and to take on the world.”
Clive Selley, CEO, Openreach, commented: “Realising the potential laid bare in this report won’t just need a concerted effort across the tech sector, but we believe it needs widespread full fibre broadband infrastructure coupled with people actually upgrading to the fastest fibre. Ultrafast, ultra-reliable connectivity will enable anyone to launch a business and work from wherever they choose. It will reduce commuting and carbon emissions, and unlock job opportunities for people such as carers, older people and parents looking to return to work. Ultimately, research suggests it could grow our economy by around £60 billion per year. At Openreach we’re determined to lead this digital transformation and that’s why we felt it is so important to be part of this report”
Dan Bayley, Head of Tenant Representation, BNP Paribas Real Estate, commented: “The UK is fast establishing itself as a leading tech hub, supporting jobs and economic growth across the whole of the country. Our research shows tech businesses were behind 2.3m sq ft of office uptake in London in 2019 and the most active sector accounting for a 19% share. For continued success, access to the right type of office space, in attractive vibrant locations will be key to attract talent. Flexibility and choice in terms of space and leasing arrangements, allowing businesses to scale up, when needed is also important. The industry is incredibly versatile and we are excited to be working closely with Tech Nation to support its future growth.”
