The number of new UK tech company incorporations has dropped following a period of sustained growth, new data has shown, prompting fears of a tech sector slowdown.
In the first quarter, there were 13,802 new tech companies registered in the UK, but in the second quarter, it dropped by 11% to 12,318, according to audit, tax, and consulting firm RSM UK.
This overall decline in new tech companies comes after a record-breaking 2023, which saw 51,017 new tech companies created in the UK – the highest number in five years.
While London retained its lead in tech incorporations compared to other UK regions, its growth fell more than the national average, at 16%, going from 7,253 in the first quarter to 6,170 new tech companies in the second quarter of 2024.
In second and third place were the South East and the East of England respectively.
‘Uncomfortable reading’
Ben Bilsland, partner and head of technology at RSM UK, said: “This year got off to a flying start, with new UK tech incorporations hitting a five-year high. However, these latest Q2 figures indicate that, as anticipated, the tide may be turning on tech growth. This might present uncomfortable reading for both the industry and the government.
“While on one hand, the new government is grappling with a £22bn budget shortfall, on the other, it cannot afford to take a strong tech sector, which contributes around £150bn a year to the UK economy, for granted. With that in mind, and with high interest rates and persistent inflation continuing to present economic challenges, we encourage the government to do all it can to maintain growth in the sector.”
His comments come almost a week after the government scrapped £1.3bn of funding for AI and compute projects pledged by the Conservatives.
The Department for Science, Innovation and Technology said the pledges made by the previous government were not allocated in its budget.
“The government is taking difficult and necessary spending decisions across all departments in the face of billions of pounds of unfunded commitments,” said a DSIT spokesperson.
On Wednesday, the government unveiled more than 200 businesses and research organisations have received a share of a £32m pot for AI projects.