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UK tech investment hits record $15bn despite COVID and Brexit

·4-min read
London is fourth for tech venture capitalist investment globally behind San Francisco, Beijing and New York.
London is fourth for tech venture capitalist investment globally behind San Francisco, Beijing and New York. Photo: Getty Images

Tech venture capital investment in the UK hit a record high of $15bn (£10.8bn) in 2020 despite the economic fallout of the coronavirus pandemic and complications of Brexit, a new study revealed.

According to Tech Nation's latest report, health and wellness companies raised $38bn in 2020, an increase from $28bn in 2019.

The report quoted UK prime minister Boris Johnson as stating that: "In North West England we saw an increase in health tech investment of over 200%, while across the UK our digital sector continues to make an enormous contribution to fighting the pandemic: from connecting locked-down patients with their GPs to offering NHS staff free access to workplace mental health platforms."

He added that 2020 was "a year in which the brutal necessity of restricting human contact has escalated the importance of tech of all kinds, from the NHS app to Zoom calls."

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Augmented reality, e-sports and gaming accounted for over $2.4bn of total venture capitalist investment to companies including US-based Caffeine, which raised $126m for their gaming, entertainment and creative arts broadcasting platform.

Tech Nation found that the UK is now third in the world behind the US and China when it comes to investment in tech companies, and noted that the gap between the UK and the two global powers is closing compared to previous years.

Chart: Tech Nation
Chart: Tech Nation

It also found both the US and China are investing more in UK tech companies than ever before, with 63% of investment into UK tech came from overseas in 2020, up from 50% in 2016.

Chart: Tech Nation
Chart: Tech Nation

It also found that London is fourth for tech venture capitalist investment globally behind San Francisco, Beijing and New York, at $10.6bn.

Chart: Tech Nation
Chart: Tech Nation

“The UK’s tech success is the result of foresight, drive and dynamism. The strong and growing tech ecosystem we have nurtured over the years is delivering stellar results. I believe that this is just the beginning of what the UK can achieve,” said Tech Nation CEO Gerard Grech.

The study revealed the UK tech startup and scaleup ecosystem is valued at $585bn, 120% more than in 2017, and more than double the next most valuable ecosystem, Germany, at $291bn.

What’s more, the rate of tech gross value added contribution to the UK economy has grown on average by 7% per year since 2016.

The report also said 2020 was a record year for investment in deep tech, jumping by 17% to just under $4bn. "From blockchain to biotech, this AI-driven sector is the bedrock upon which much of our future will be built," it noted.

Deep tech is a term for technologies not focused on end-user services, such as artificial intelligence, robotics, blockchain and quantum computing

The UK is also third in the world for investment into impact tech, the report said, which has increased 160% since 2018 while in the US it rose by 15% over the same period.

READ MORE: London tech startups raise $10bn despite pandemic

Tech and consumer internet firms accounted for 40% all the capital raised through IPOs on London Stock Exchange (LSEG.L) in 2020.

"Despite uncertainty caused by the pandemic, UK Tech IPOs gained strong momentum in 2020, signalling the UK’s attractiveness for tech companies and the continued health of the UK late-stage tech ecosystem. Eight of the UK’s tech companies IPO’d on the LSE in 2020, raising a total of £3.1bn," the study noted.

“The momentum around tech IPOs is set to continue as we are seeing a lot of UK technology firms that are interested in listing and whilst access to capital is a key driver for some businesses there are a whole range of motivations," said Roland Emmans, Head of Technology Sector for Commercial Banking at HSBC UK.

"Today’s Tech Nation report demonstrates that the UK’s tech ecosystem has thrived through the pandemic. As we look beyond the COVID-19 pandemic what will be interesting to see is emerging hybrid ways of working as businesses look to maintain the best of remote working whilst getting back in the office – technology still has a huge role to play in this approach," he added.

Octopus Energy, Arrival, Cazoo, Gymshark, infobip, Gousto and Hopin were the seven unicorns to make it into the unicorn class of 2020, bringing the UK’s total unicorn count in 2020 to 80.

An additional six unicorns have already been created so far in 2021: Blockchain, Kymab, PPRO, Touchlight Genetics, Starling Bank and Zego.

Fintech challenger, Revolut, and insurance platform, Ki, helped to cement the UK’s position globally in these spaces. Revolut raised $580m over the course of 2020, while Ki raised $500m in its bid to redefine the commercial insurance market.

The report also found 2019 was a record year for edtech investment in the UK, with $184m raised. However, there was a decrease in 2020 to $124m, which went against international trends.

"Edtech is essential to growth post Covid-19; reskilling and upskilling will be imperative for the economy," the report said.

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