London and UK tech demonstrates resilience as startups navigate virus crisis

Figures compiled by Tech Nation and Dealroom for London & Partners and the Digital Economy Council show that investors continue to back some of the UK’s most promising tech companies, despite the challenges posed by coronavirus.

As the UK tech sector meets virtually during #LTWConnects events this week, figures show UK digital tech companies are continuing to attract investment, are still advertising vacancies and are optimistic that they can navigate the crisis.

The UK capital leads the way and is now established as a global tech leader with London-based companies raising $4bn since the start of January, more than Paris, Stockholm, Berlin and Tel Aviv combined.

Fintech dominates fundraising in London, accounting for 39% of 2020 investment. Enterprise software companies raised a fifth of the money invested in the first five months of the year.  

While digital tech vacancies have declined, the UK tech sector is still recruiting with over 90,000 jobs advertised at the end of April, twice the number of openings in accounting and finance, the next sector with the most vacancies.

Further analysis of the figures show that the UK’s thriving VC tech community has raised $5bn in new funds from January to June 2020, almost as much as the $5.4bn raised throughout the whole of 2019. 

Just as the 2008 financial crisis triggered an entrepreneurship boom in the UK, from which Silicon Roundabout’s cluster of startups has grown into a nationwide network of more than 35,000 businesses, the report demonstrates that UK tech has deep foundations to emerge strongly from the crisis.

The Mayor of London, Sadiq Khan said: “The tech community in London and across the UK has risen to the challenges posed by coronavirus, demonstrating the sector’s resilience and innovation. This new data shows the strength of the industry and I remain confident that London’s position as a global tech hub will continue as we move towards recovery.”

UK’s position of strength

The UK’s tech sector went into the coronavirus crisis in February in a strong position. From January to the end of May, UK tech companies raised $5.3bn, almost twice the amount raised by France ($2.8bn) and ahead of Germany ($2bn).

Following a record year for venture capital funding in 2019, there have been 15 UK rounds over $80m in 2020 so far, 12 of which were raised by London-based companies including $500m by Revolut and $360m by Octopus Energy.

In April, the Government unveiled its Future Fund of £250m of matched funding for startups, so that tech companies which are typically loss-making could access support. Small and medium-size businesses focusing on research and development can also benefit from £750m of grants and loans, supporting innovative technologies that will spur the country’s recovery from the pandemic.

The coronavirus crisis has underlined the crucial role that technology plays in our society and our economy - from keeping us connected to workplaces, friends, family and colleagues, to allowing us to order shopping and prescriptions to our doorsteps. Measures to curb the spread of the virus have accelerated digital adoption and this trend is expected to last due to social distancing measures.

Over the past 12 months, UK tech has built on a decade of consistent growth in which more unicorns were created than in any other country. Since last year’s London Tech Week, seven more companies have achieved ‘unicorn’ status - a privately-owned tech business with a value of at least $1bn - taking the UK’s total to 79 – twice the number of unicorns produced by second-place Germany, on 32.

London has added six new unicorns to its list since this time last year, including clean energy startup Octopus Energy, fintech firm Ebury and Babylon Health, a healthtech company whose coronavirus Care Assistant app is relieving pressure on 111 services and freeing up doctors to focus on those most in need during the pandemic.

Similarly, the UK has 109 potential unicorns, companies valued between $250m and $800m, compared to half that number in Germany (58) and France (57). On a city level, London has 66 potential unicorns, 80% more than its nearest competitor, Paris (36).

UK tech also continues to attract world-class investment. Since 2018, the UK has had more investment from the US and Asia than any other country in Europe, with foreign investment generally making up 67% of the UK’s total investment. The UK also has a strong foundation of domestic investment (38%) which underpins its attractiveness to global investors.

Janet Coyle, Managing Director for Business, London & Partners commented: “The power of tech is more important than ever as we respond to the coronavirus pandemic. London and the UK are home to an array of tech businesses that are driving change and innovation at this challenging time and these new findings, released to coincide with London Tech Week’s #LTWConnects, demonstrate the resilience and strength of our tech ecosystem. As we look towards the future, it is important that the tech community continues to drive greater inclusivity and diversity across the sector to ensure opportunities are available for everyone.”

Tech for Everyone - People, Places, Sectors 

UK tech now employs more than 2.93 million people across the country with salaries that are, on average, £10k higher than other sectors.

Advertised vacancies were continuing to climb at the start of 2020 before the coronavirus and lockdown took its toll. Even so, more than 90,000 tech sector jobs were being advertised at the end of April. This is twice the number of openings in accounting and finance, the next sector with the most vacancies.

The report’s findings also show that the UK - which has established leadership in fintech, deeptech and AI - is seeing other sectors gaining in traction, including healthtech, energytech and edtech.

#LTWConnects this week will bring the tech community together to discuss how UK tech is tackling our greatest challenges and the important role it will play in the world’s future, alongside bringing the power of resilience, collaboration and leadership to the forefront.

In September, London Tech Week will host a larger series of virtual and physical events to continue to amplify the voices of technology and drive forward conversations. There will be an emphasis on virtual curated content to enable international audiences who may not be able to travel to join the conversation and connect with the global tech community.

Cindy Rose, UK CEO, Microsoft: “These numbers reflect the inherent strength of the UK tech sector and reinforce my strong belief that the UK remains an attractive destination to start and grow a successful digital business. Undoubtedly, there are economic headwinds ahead, but with our world class talent, strong start-up ecosystem and the accelerated pace of technology adoption in the UK, I'm confident the UK tech sector will emerge strongly from this crisis and be a key factor in driving inclusive economic growth and recovery.”

Digital Secretary, Oliver Dowden:  "The UK's tech sector has shown resilience in these challenging times and the levels of investment in the year to date have consolidated our Europe-leading position. We have a vast pool of talent in the country's digital and tech firms who have played a big part in supporting communities across the UK and beyond throughout the pandemic and I applaud them for their ongoing efforts. The government will continue to champion and support the sector as it navigates the months to come as we step up our coronavirus recovery plans. We will back entrepreneurs, encourage innovators and help businesses make the most out of the opportunities the digital and tech world provides."

Nicola Mendelsohn, VP EMEA, Facebook: “As highlighted by this report, the UK tech sector continues to flourish, evolve and grow year-on-year, cementing its place on the global stage. Given the current pandemic, it’s important to recognise areas of opportunity such as tech and equip businesses across the UK with the tools and resources to accelerate their digital transformation so they can re-emerge and recover from this and future downturns.”

Baroness Martha Lane Fox, founder of Doteveryone: “Resilience and agility is intrinsic to tech startups and founders. Having to face, and respond, to challenges is something that is inherent in any entrepreneur and with so many amazing companies in the UK, this puts our tech scene in a strong position for the months and years ahead.” 

Gerard Grech, chief executive of Tech Nation: “Many businesses are adapting and innovating to support the fight against coronavirus, demonstrating the resilience and resourcefulness of the UK tech sector. Although we are seeing many tech companies closing key rounds of funding, the picture is being monitored closely at Tech Nation, especially across different parts of the country, where access to finance may not be as strong. These findings today confirm that the UK is well positioned to face the challenges that lie ahead and leave Covid-19 in a position of strength.”

Suzanne Ashman, partner at LocalGlobe: “Startups are by their nature fragile businesses and the covid-19 crisis is testing them to the limits. But we should be optimistic that the strong foundations laid down in the last decade will help more early stage UK tech companies to emerge from this crisis stronger and better able to compete on a global stage.”

Russ Shaw, Founder, Tech London Advocates & Global Tech Advocates: “Despite facing unprecedented adversity, London tech continues to lead the way in Europe and it’s encouraging to see the growth of verticals such as HealthTech, EdTech and Cybersecurity. For UK start-ups, economic support packages are a crucial lifeline, but their requirements are far more immediate if they are to survive the coming months, particularly for those without investors on board. The foundations of the sector may be strong, but a generation of entrepreneurs without the right backing could risk them being chipped away.”

Download the full report here.