Digital Economy Council: UK tech sector number one in Europe

The UK tech sector will end the year leading Europe, retaining its position as the main challenger to the US and China. This is amidst a global backdrop of difficult economic conditions, according to figures from Dealroom for the Digital Economy Council, part of the Department for Culture, Media, Culture and Sport (DCMS).

During 2022, fast-growing UK tech companies have continued to raise investment from venture capital firms (£24bn), more than France (£11.8bn) and Germany (£9.1bn) combined. This takes the total raised over the past five years to nearly $100bn (£97bn). 

The latest figures, compiled by Dealroom for the Digital Economy Council, state that the sector employs three million people.

Paul Scully, Parliamentary under-secretary of state at the DCMS said, regarding Dealroom’s figures: “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 startups and ambition to boost people’s digital skills.”

While the UK remains the dominant country outside the US for fintech investment (nearly £10bn raised this year), it is also becoming a leading hub for “impact tech” – companies creating technology to help reach reach the UN Sustainable Development Goals. There were 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.

Yoram Wijngaarde, founder of Dealroom, said: “The UK’s startup ecosystem is unignorable. UK startups are worth more than a trillion dollars collectively, with over 130 unicorns, and many of the world’s most important investors use London as a logical launchpad into the rest of Europe.

“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.”

Green energy is receiving the bulk of investment, such as Newcleo, a startup that is developing technology to enable safe uranium recycling (£258m). Scaleups tackling healthcare inequality, such as Cera, which brings technological innovation into social care, raised £263m; while GrowUp Farms, a vertical farming company which uses technology to grow food more sustainably, raised £100 million. The steady influx of investment into impact tech means the sector now employs more than 53,500 people, up from 37,500 last year. 

Consistent growth across UK tech saw the industry reach $1tn in value earlier this year, making it only the third country ever to hit this valuation after the US and China. This means the UK tech industry is ahead of its European peers and is worth more than double Germany’s ($467.2bn) and three times more than France’s ($307.5bn) as well as retaining the lead when it comes to overall funding, unicorns and startups numbers. 

Martha Lane Fox said, in respect of the figures: “UK tech has built some incredible products that are solving everyday challenges people face across the country and the world. But if we want to make this industry truly world-class, we need to ensure that the sector not only employs people from all backgrounds, but also funds founders from all backgrounds. This will improve UK tech for the better and drive real change.” 

Dealroom’s commentary highlights that the UK has produced almost 400 high-growth startups since 2000. This includes 144 unicorns – companies with valuations of $1bn or more – and 237 futurecorns, fast-growing companies which are predicted to be the most valuable businesses in the next few years. The new figures showcase how the so-called ecosystem is expanding, up from 116 unicorns and 204 futurecorns at the same time last year. 

Upskilling and reskilling have become a key focus in the sector with nearly 3,000 edtech startups having raised a collective £1.7bn in funding. Companies such as Academy, Code First Girls, Immersive Labs and Multiverse are focused on enabling people of all ages to gain the skills they need to succeed in tech roles, from tech apprenticeships to coding, development and cyber security. 

Anna Brailsford, CEO of Code First Girls, said: “From using AI to tackle healthcare inequality to designing and building space missions, every day there are incredible tech businesses being launched and scaled in the UK. Yet, too few women have the opportunity to work for these impactful startups because they have not previously been given the encouragement to look at a career in tech or learn key skills.

“We’re aiming to train 26,000 women in the UK over the next five years and place them in tech roles so they can use their knowledge and expertise to change this industry for the better.”

Along the same lines, Nicole Crentsil, co-founder and CEO of Black Girl Fest and angel investor, said: “As UK tech adjusts to the global challenges, there needs to be a concerted effort by the entire industry to ensure that minority founders and communities are not left behind. Last year, black women received only 0.34% of VC funding. That’s why initiatives such as Black Girl Fest and Launchpad are needed to empower and enable black founders to build the products and services that are missing from the world.” 

According to job search engine Adzuna, UK companies are increasingly hiring for entry-level tech roles, up from 6,596 in November 2021 to over 15,000 this year, as they seek to bring in a new generation of tech talent and develop them into future leaders.