Britain will end the year as Europe’s leading centre for supporting the technology ecosystem, retaining its position as the main challenger to the US and China.
New figures from Dealroom for the Digital Economy Council show that a near-record £24 billion was raised across the UK this year, more than double the £11.8bn invested in France and £9.1bn in Germany.
The technology sector employs three million people and has produced 144 unicorns — companies with valuations of $1 billion or more — since 2000. Two of these were in Edinburgh. There are estimated to be 237 future unicorns.
Fintech companies accounted for almost half of funds raised (£10bn) while the total raised over the past five years is £97bn.
The UK is also becoming a leading hub for impact tech – companies creating technological solutions to reach the UN Sustainable Development Goals. There are nearly 1,200 impact tech companies in the UK which have raised $3.8bn in funding this year, ahead of last year’s record £3bn.
Growth across UK tech saw the industry reach the $1 trillion value milestone earlier this year, making it only the third country ever to hit this valuation after the US and China.
Upskilling and reskilling have become a key part of the UK’s dominance in tech with nearly 3,000 edtech startups having raised a collective £1.7 billion in funding.
According to smarter job search engine Adzuna, UK companies are increasingly hiring for entry-level tech roles, up from 6,596 in November last year to over 15,000 this year, as they seek to bring in a new generation of tech talent and develop them into future leaders.
US investors including General Catalyst, Sequoia and Lightspeed have increased their teams in the UK in 2022 after opening new offices here last year, and global firm New Enterprise Associates hired its first UK-based partner in October.
European investor Earlybird VC has opened an office in London earlier this year. This follows another strong year of fundraising for UK-based funds, which have collectively raised £9.2bn this year, compared to £9bn in 2021.
Digital minister Paul Scully said: “UK tech has remained resilient in the face of global challenges and we have ended the year as one of the world’s leading destinations for digital businesses. This is good news and reflects our pro-innovation approach to tech regulation, continuing support for start-ups and ambition to boost people’s digital skills.”
However, there are signs that investment in technology businesses is slowing down as fears grow about the global economy.
James Wise, partner at Balderton, said: “This has undoubtedly been a much harder year for the entrepreneurs and businesses in the UK.
“Despite this, funding for innovative new companies here remains the highest in Europe, thanks to our strong talent base and global leadership in fields such as life sciences and AI.
“We hope the Government will continue to support start-ups innovating in these fields, and keep regulation up to date with the latest technologies.”
There is also concern about the UK’s lack of ability to grow large companies that can rival the US tech giants and attract them to the public markets.
The weak pound has exacerbated the problem by attracting a wave of takeovers of UK companies. There are now only two tech companies listed on the FTSE 100.
Yoram Wijngaarde, founder of Dealroom, said: “The UK’s startup ecosystem is unignorable. UK startups are worth over a trillion dollars collectively, with over 130 unicorns.
“While the lofty rounds and valuations of 2021 are long gone, healthy startup ecosystems with strong fundamentals don’t disappear overnight. We’re now seeing a “return to normal” in startup markets, which for the UK’s startup ecosystem means returning to its roots of ambitious, outward-focused, open entrepreneurship.”
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