The UK tech sector has shown both remarkable resilience and growth in 2020 in spite of unprecedented challenges across the Covid-19 pandemic and Brexit uncertainty according to the Tech Nation Report 2021.
Insights from the Tech Nation Report 2021 reveal a number of successes the UK can celebrate, including world-leading growth in deep tech investment at 17%, while North America and Asia both experienced falling rates between 2019 and 2020.
Venture capital (VC) investment in Net Zero tech also boomed by 160%, with a surprise 160% growth in transport tech VC investment, despite global lockdowns last year.
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 unicorns IPO’d on the LSE in 2020, raising a total of £3.1bn.
When compared with 2018, 2020 had half the number of IPOs yet double the amount of capital raised. A notable highlight in 2020 was Manchester-HQ’d The Hut Group’s IPO (THG), Europe’s largest-ever eCommerce IPO, which raised £1.9bn at a market capitalisation of £5.4bn.
For the second year in a row the UK’s capital has secured fourth spot for VC investment into tech by city, keeping ahead of Shanghai (5th) and Hangzhou (40th) in China, which have both outperformed London between 2015 and 2018.
The top 30 cities for tech investment in 2020 are heavily dominated by US cities, but comparing tech investment rank to current estimates of GDP shows that London (ranked 8th for GDP behind Paris, Seoul and Chicago) is disproportionately successful for tech investment relative to its economic size.
Looking at the total sum invested in cities’ tech sector over the last five years, the top two cities – Beijing and San Francisco – look to be losing their lead, with yearly investment dropping by 5% and 6% respectively between 2015 and 2020.
In fact, of the top five cities for total sum invested in this period, only London has experienced growth in tech investment over the last two years, increasing 87% from $5.6bn in 2018 to $10.6bn in 2020. Tech investment has been declining every year since 2018 for both New York City and Beijing.
Beyond the capital, a number of cities, regions and nations also experienced significant wins in 2020. The city of Hull in Yorkshire stands for venture capital investment, ranking 6th in the UK with €97.8m. It’s previous investment record was €12.4m in 2017 (ranking 14th). This year’s success – with £80m raised by smart city business Connexin alone – is a key example of how high-growth businesses in emerging technology can change the playing field for regional economies.
Edtech activity in 2020 was clustered in the East of England and the Midlands, with a number of companies harnessing deep tech for adaptive educational tools. CamBioScience raised £1.66m in 2020 to grow its AI-driven personalised learning platform for careers in life sciences. FluenceWorld, based in Birmingham, raised £355k for its language analysis and insights product identifying and curating personalised teaching resources.
The climate tech sector in the UK is developing rapidly, evidenced in part by the fact that the amount invested across the whole sector grew 81% between 2018 and 2019, and another 63% between 2019 and 2020 to reach £1.3bn. Wales in particular saw radical developments in 2020; a £150m deal for Riversimple which manufactures hydrogen-powered electric vehicles contributed to a record year for climate tech in Wales with more than 17 times the total amount invested in 2019.
The Covid-19 pandemic has not only highlighted the importance of investing in health technology and remote medical services, but also challenged the idea that startups in major cities like London have an advantage by being optimally positioned for in-person meetings and pitches with investors. With most fundraising deals happening entirely remotely last year, the North West of England experienced the highest increases in healthtech investment from 2019 – up 224% from £25m to £82m.
Between 2019 and 2020 most regions of the UK saw a drop in total amount invested in creative technology, with only one exception: Scotland, where both the number of deals increased (from nine to 10) and total investment increased from £4.6m to £7.6m.
Much of Scotland’s success in this area is down to its thriving gaming business hubs; Edinburgh-based online game developer Build A Rocket Boy raised £32.7m in 2020 and other raises last year included online game advertisement service AdInMo, developer of skill-based games Earthbound and gaming design house Incentive Games, all based in Edinburgh.
Gerard Grech, founding chief executive, Tech Nation, comments: “This year has highlighted the UK tech sector’s enormous resilience and world-beating innovative spirit. In the face of a major global crisis, it has not only survived; in many areas, it has boomed. From EdTech to HealthTech, digital pioneers are rebuilding the British economy and setting new standards worldwide.