Fast-growing UK tech companies secured a record £5.5bn in foreign investment in the first seven months of this year, according to research for the government’s digital economy council. The study for the Department of Digital, Culture, Media and Sport (DCMS) revealed that the UK has overtaken the US for the amount of investment per capita.
Funding growth was driven by US and Asian investment in private companies valued at more than $1bn, such as a renewable energy company Ovo Energy and takeaway business Deliveroo.
Experts say the weaker pound is drawing investors to the UK tech sector, which leads Europe in terms of funding. It comes as overall foreign direct investment (FDI) in the UK is falling, amid uncertainty over Britain's future trading arrangements with the EU. Since 2013, UK tech has attracted double the investment of Germany from US and Asian investors, and six times as much as France.
With the exception of Germany, the surge in foreign investment from US and Asian investors is higher than the amount received by the whole of the rest of Europe combined. Since 2013, this takes the total amount of money put into the sector by US and Asian investors to $14.6 billion compared to a respective $6.5bn and $2.5bn into Germany and France.
Natalie Black, HM Trade Commissioner, Asia Pacific said: “Today’s figures demonstrate investors’ confidence in the UK tech sector, which continues to go from strength to strength growing one and half times faster than any other sector in the economy. By attracting a broader mix of investors, particularly from Asia, we are showing that the UK’s tech sector is one of the most competitive in the world with a stable, bright future.”
The top 30 funded UK tech companies of the past three years - including Starling Bank, Skyscanner, Darktrace and Checkout.com - have collectively created more than 5,000 new positions. In 2016, a total of 10,100 people were employed by these leading UK tech firms. By 2018, this had risen to 13,600 and in 2019 to date, this figure sits at 14,900 and rising. When looking at the sector as a whole, in at least five UK cities, one in ten of the workforce is now involved in digital tech and a total of 2.1 million people work in the industry across the UK. Digital tech roles offer salaries on average 10% higher than in other industries.
Still, worries about what impact Brexit will have on the UK's tech talent pool are worrying investors and companies, who are concerned the UK will see a brain drain if EU nationals aren’t able to work in the UK in the event of a no-deal Brexit. "It's our biggest concern right now," said Russ Shaw, founder of Tech London Advocates, a campaign group promoting London's technology sector. “One in five tech workers in London is from the EU. We're growing these businesses, and the money is flowing in, but we don't have enough talent in the country. We need a transition plan for companies who need to know what to do about staffing after 31 October. Otherwise it undermines our credibility."
Mr Shaw has said one of the ways the UK could mitigate these risks is by making the immigration process for overseas workers easier and more welcoming in the future.