UK tech sector grows tenfold in 10 years

The UK’s technology sector has seen a tenfold increase in both venture capital investment and the number of billion-dollar “unicorn” companies over the past decade, industry figures reveal.

Between 2010 and 2020 investment in the UK’s tech industry grew from £1.2bn to £11.3bn, with most of this increase taking place since 2015 when investment was £4.1bn, according to figures from the government’s Digital Economy Council and Dealroom.co.

For example, in 2017, 2019 and 2020, the UK attracted record levels of tech investment, and despite a 28% dip in venture capital funding during 2018 – which was largely attributed to the political uncertainty surrounding Brexit at the time – UK tech firms still managed to raise £2.49bn.

There has also been a tenfold increase in the number of unicorns (companies valued at more than $1bn), which increased from eight in 2010 to 81 by the end of 2020. A further 10 unicorns have been created since the start of 2021.

Out of these unicorns, 32 were financial technology (fintech) firms, 14 focused on enterprise software, and 13 were in the health tech space – sectors that have consistently attracted the most capital over the past decade.

By comparison, France, Germany, Sweden and Israel had combined total of 85 unicorns in 2020, and only France and Germany raised more than £4.3bn in Venture capital funding last year.

“UK tech has seen record levels of growth over the past decade, turning a nation of startups into one of scaleups. Investors are interested in backing UK startups because of a combination of cutting-edge research, skilled engineering and tech talent, and operators who understand how to build a strong, sustainable business,” said digital secretary Oliver Dowden.

“This government will do all it can to support the entrepreneurs who have created this vibrant new part of our economy and which now employs almost three million people across the country, from our world-renowned tech centres like London and Cambridge to our cities, suburbs and rural areas.”

The figures also show that a further 132 companies are now regarded as having the potential to reach unicorn status, up from just 10 in 2010.

Although the majority of these future unicorns are based in London (83), a number of high-growth scaleups can be found in Cambridgeshire (10), Oxfordshire (11), the North West generally (5), and Scotland (4).

The five future unicorns with the highest valuations are, according to the figures, digital banks Zopa and Atom Bank, children’s entertainment firm Moonbug, connected car data provider Wejo, and ethical jewellery sourcing company Vashi.

“The rate of growth in the UK tech ecosystem in the past 10 years has been immense and we are confident that there is more to come. The UK now has an incredible 132 ‘futurecorns’, more than France and Germany combined, which demonstrates the extent to which the UK is leading Europe,” said Tech Nation chair Stephen Kelly.

Yoram Wijngaarde, founder and CEO of Dealroom.co, added: “Emerging hubs continue to be inspired by the UK ecosystem’s journey from an eccentric cluster of companies around a grim roundabout to the successful global companies we see now.

“With continued policy innovation, research investment and the right talent, the UK can build on the momentum into the next decade as the beating heart of a European tech ecosystem turning global heads.”

Despite the sustained increase in venture capital funding over the past decade, a significant portion went to a small number of firms and was concentrated in London.

During 2020, for example, when UK tech firms collectively raised a record-breaking $15bn, around 20% of this total (roughly $3.5bn) went to just 10 scaleup firms. Most of the capital ($10.5bn) was also raised by firms in London.

However, the record levels of investment did coincide with a sharp increase in the number of new technology firms being set up, with UK business creation figures from March 2021 showing that a new technology business was created every half an hour during 2020, with nearly 19,500 registering in total across the UK.