During the Brexit debate, it was widely argued that the UK’s growing reputation as a viable technology leader would help to safeguard the nation’s economy in the event of a no-deal exit from the EU.
This argument was seemingly borne out last year, when the UK tech sector enjoyed a record-breaking 12 months from the perspective of investment. More specifically, investments in this market soared to £10.1 billion in 2019, representing a £3.1 billion increase on the previous years’ already impressive figures.
Interestingly, the UK received higher levels of investment than Germany and France combined during this period, and much was expected from 2020. But has the Covid-19 outbreak scuppered these plans, and what does the future look like for technology investment in the UK?
2020 Forecasts – What do we Know so Far?
According to the initial analysis of 2020, the Covid-19 outbreak has not adversely impacted on the amount invested into the UK’s tech sector during the first quarter and beyond.
More specifically, recent analysis has found that the total level of investment into UK tech startups was up by a whopping 34% between March 23rd and April 27th. This represents a marked increase, and one that highlights the fact that some sectors have actually enjoyed surprising growth during the global pandemic.
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Interestingly, however, the total number of deals completed fell by an even larger margin, with the cumulative 114 transactions down by 39% on the corresponding year’s figures. This confirms that while investors may be a little more selective about the firms and the industries that they invest in, they remain committed to making large and impactful cash injections where appropriate.
This also highlights the socio-economic impact of Covid-19, of course, with some sectors of the technology market having been directly hit. However, niches such as AI, cybersecurity and forex trading retain high levels of growth and popularity, while new startups in these areas were able to command £50.2 million in investment during the stated period.
Will This Investment Aid the UK Post-Covid 19?
As we’ve already said, the increased levels of investment over the course of the last 16 months has already provided far greater levels of optimism in relation to Brexit, and the same logic can also be applied to the coronavirus fallout.
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More specifically, it appears as though London is strengthening its reputation as the capital of the global fintech market, while the over performance of the UK sector (especially in relation to leading EU economies like France and Germany) should help to drive inflated levels of growth during Q3 and Q4.
There’s also a sense that this increased rate of investment is likely to continue for the foreseeable future, particularly as some of the most successful deals are often struck during downturns. Such periods certainly provide greater access to talent and ideas, while certain companies may also be undervalued as a result of the burgeoning recession.
The only question that remains is whether the increased investment can translate into improved economic and currency performance, particularly over a sustained period of time.
The GBP certainly benefited from a broad stock market improvement following the investment boom in March and April, although many of these gains were eroded by wider pressures created by trading uncertainties and the BoE’s fiscal policy.
This offers at least some cause for optimism, although we’ll need to watch this space closely over the course of the next quarter and beyond.