The evolution of the UK’s tech ecosystem

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 new technologies. 

UK Tech sector growth

2019 was an incredibly positive year for the UK tech sector. Compared to the rest of the UK economy, digital tech grew six 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 six times greater than growth across the economy as a whole, which increased by 1.4%).

Source: Tech Nation 2020; DCMS 2020

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 nine percent of the national workforce compared to seven percent 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.

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.

UK growth powered by high value scaleups across the country

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 eight tech unicorns were created in 2019. 

UK investment in Europe perspective

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%.

UK pioneering new technologies and leading in value driven technology

In 2019, for every £1 invested into New Technologies (AI, robotics, cyber security, blockchain, IoT, virtual reality, and augmented reality) in Europe, 35 pence was invested into UK companies. 

• Artificial Intelligence:
• The UK is 3rd in the world for the level of AI investment. From 2015 to 2019 UK AI companies raised £3.2bn of global AI investment, meanwhile the US raised £32bn, and China raised £12bn
• The UK is the only country of the top five AI nations to have demonstrated consistent positive year-on-year growth for the last five years

• Cyber security
• The cyber security big hitters are the US and China, closely followed by Israel and the UK.
• The UK raised £7.8bn in cyber security investment from 2015 to 2019. The US and China continue to dominate with total investment of £17.5bn and £16.4bn from 2015 to 2019

• Blockchain
• The UK comes in fourth in the world for blockchain investment at £8.9bn of investment for 2015 to 2019. 
• The US is third in the world for blockchain deals, at 249 compared to the US at 1,212 and China at 268

• Healthtech 
• £1.18bn raised by UK healthtech companies In 2019 - accounting for 61% of the total European market (£1.93bn)

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.