The UK will end the year as Europe’s leading center for supporting technology ecosystems, maintaining its position as the main challenger to the US and China.
A near-record £24bn has been raised in the UK this year, more than double the £11.8bn invested in France and £9.1bn invested in Germany, new figures from dealroom, the digital economy council, show.
Since 2000, the tech industry has employed 3 million people and produced 144 unicorns — companies valued at $1 billion or more. Two of them are in Edinburgh. There are an estimated 237 future unicorns.
Fintech companies accounted for almost half (£10bn) of funds raised, out of a total of £97bn raised over the past five years.
The UK is also emerging as a leading center for impact technologies – companies creating technological solutions to achieve the UN Sustainable Development Goals. Nearly 1,200 high-impact tech companies in the UK have raised $3.8 billion in funding this year, up from last year’s record £3 billion.
Growth in the U.K. tech sector earlier this year saw the sector hit a $1 trillion value milestone, making it the third country to reach that valuation, after the U.S. and China.
Upskilling and reskilling has become a key part of the UK’s tech dominance, with nearly 3,000 edtech start-ups raising a combined £1.7bn in funding.
UK companies are increasingly hiring for entry-level tech roles, up from 6,596 last November to more than 15,000 this year, according to smarter job search engine Adzuna, as they seek to bring in a new generation of tech talent and develop them to future leaders.
Following the opening of a new UK office last year, US investors including General Catalyst, Sequoia and Lightspeed are adding to their UK teams in 2022, with global firm New Enterprise Associates hiring its first UK partner in October partner.
European investor Earlybird VC opened an office in London earlier this year. This follows a strong year for UK funds, which have raised £9.2bn this year compared with £9bn in 2021.
Digital Minister Paul Scully said: “UK tech has remained resilient in the face of global challenges and we ended the year as one of the world’s leading destinations for digital business. This is great news and reflects our support for An innovative approach to technology regulation, continued support for start-ups and an ambition to improve people’s digital skills.”
However, there are signs that investment in technology companies is slowing as concerns about the global economy mount.
James Wise, partner at Balderton, said: “It has certainly been a much tougher year for UK entrepreneurs and businesses.
“Nevertheless, funding for innovative new companies here remains the highest in Europe, thanks to our strong talent base and global leadership in fields such as life sciences and artificial intelligence.
“We hope the government will continue to support start-ups innovating in these areas and keep regulation up to date with the latest technology.”
There are also concerns that the UK lacks the ability to develop large companies that can compete with US tech giants and attract them to the open market.
The problem has been exacerbated by a weak pound that has sparked a wave of takeovers by British companies. There are now only two technology companies listed on the FTSE 100.
Yoram Wijngaarde, founder of Dealroom, said: “The UK startup ecosystem is beyond recognition. The combined value of UK start-ups is over $1 trillion and there are more than 130 unicorns.
“While the high rounds and valuations of 2021 are long gone, a healthy start-up ecosystem with strong fundamentals is not going to disappear overnight. We are now seeing a ‘return to normal’ in the start-up market, and that’s important for the UK’s start-up ecosystem For us, this means returning to its ambitious, outward-looking, open-ended entrepreneurial roots.”