UK tech businesses raised £24bn in 2022, the most of any country in Europe, but down on the £29.4bn raised last year as economic headwinds caused a significant drop in the second half of the year.
Research from Dealroom on behalf of the UK’s Digital Economy Council, part of DCMS, showed that Britain was followed by France (£11.8bn) and Germany (£9.1bn).
In 2022 the UK was home to 85,000 startups and scaleups and to date has made 144 unicorns. There were 28 companies that reached a $1bn private valuation in 2022, including AI talent platform Beamery which became a unicorn this month.
The £24bn adds a significant amount to the UK tech sector’s total funding which now stands at £97bn in the last five years.
Most of the UK tech funding came in the first half of 2022. In the first three months of the year, UK tech companies raised a record £9bn.
Rising interest rates and soaring inflation caused a notable slowdown in UK tech investment in the second half of the year. According to KPMG, VCs invested £4bn in UK businesses during the third quarter, down from the £8bn invested in the quarter prior and the lowest since Q3 2020.
Paul Scully, digital minister, said: “UK tech has remained resilient in the face of global challenges and we have ended the year as one of the world’s leading destinations for digital businesses.”
Scully added: “This is good news and reflects our pro-innovation approach to tech regulation, continuing support for start-ups and ambition to boost people’s digital skills.”
A year of two halves
Despite raising the most out of all European countries, Atomico’s annual report found that overall tech investment in the UK had declined 22% in the past year in what it described as a “year of two halves”.
It was also the year in which companies were forced to accept downrounds across Europe. Swedish buy now pay later company Klarna saw its valuation drop from $46bn to $6.7bn. UK-based payments startup SumUp has also cut its valuation.
A recent survey of investors that provide capital to VC firms said they are planning to increase their allocations in the UK next year, suggesting there will still be plenty of cash for startups despite the difficult economic landscape.
Earlier this year the UK’s tech industry was valued at $1trn, the third ever along with the US and China.
“From using AI to tackle healthcare inequality to designing and building space missions, every day there are incredible tech businesses being launched and scaled in the UK,” said Anna Brailsford, CEO of Code First Girls.