In 2016, UK tech companies received more investment than technology firms in France, Germany, The Netherlands and Denmark combined.
That’s according to the Tech Nation 2017 report from Tech City UK. The report found £6.8bn was invested by VC and private equity (PE) firms in UK tech companies last year, with their French counterparts receiving £2.4bn, those in Germany securing £1.4bn, firms in The Netherlands raising £1.3bn and those in Denmark scoring £0.9bn.
Between 2011 and 2016, UK tech firms secured a whopping £28bn – more than double the closest contender, France, with £11.4bn.
Simon Calver, partner at BGF Ventures, said: “We know from meeting entrepreneurs around the country that there are deep reserves of talent in tech clusters in the regions of the UK. Support from national investors as well local and national politicians has a big role to play in helping these clusters reach their true potential.
“With longer-term patient capital we are looking to support successful companies through their growth cycle and we are excited that the tech sector offers us many ways to do this, and right across the UK,” he added.
London is undoubtedly the jewel in the tech crown of Europe, with firms based in the city attracting £2.2bn of VC and PE investment in 2016, around £1bn more than its two closest competitors, Amsterdam (£1.15bn) and Paris (£1.07bn).
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However, it’s worth noting the overall number of VC and PE-backed tech investment deals across the 10 largest digital tech hubs fell by 34% from 2015 to 2016.
M&A activity was strong in 2016, though, with the UK tech sector experiencing record levels. While much of the investment activity was centred on London, it was Cambridge that witnessed the biggest M&A success, with Arm Holdings’ £24bn sale to Japan’s Softbank.
Other notable deals from 2016 included Micro Focus’ acquisition of the software assets of Hewlett Packard Enterprise, SwiftKey’s acquisition by Microsoft, Housetrip’s acquisition by TripAdvisor, Magic Pony’s acquisition by Twitter, Onefinestay’s acquisition by Accor Group and Skyscanner’s acquisition by Ctrip.
Going by the report’s findings, the tech community in London is thriving, with the digital tech turnover for 2016 in the city reaching £56bn, which is a 106% increase over five years.
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There are now more than 300,000 digital jobs in London, creating an active tech community, with nearly 22,000 meetups taking place in the capital in 2016 – nearly three times more than in Berlin (7,963), Amsterdam (7,915) or Paris (7,581), the report claims.
The ideas for tech companies just keep on coming, with budding entrepreneurs and seasoned businessmen and women setting up shop on a daily basis. In fact, Tech City UK found one tech company was founded in the capital every hour in 2016.
While the figures from the report paint a largely rosy picture of tech in London and the UK in general, it also highlights the nation’s shortcomings.
Gender diversity, or rather the lack of, was raised by survey respondents as an issue currently present in UK tech. The report found that in more than half of tech businesses surveyed, men outnumbered women three to one.
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Gender aside, infrastructure is presented as an issue that could hamper the future of the UK tech industry – survey respondents said the nation must stay abreast of technology advancements such as 5G if it is to remain competitive internationally.
It should come as no surprise that by far the biggest issue raised by survey respondents was the oft-referenced skills shortage. More than half of survey respondents said finding employees with the right skills was a major challenge and many shared concerns about accessing international talent post-Brexit.
“There are some big challenges ahead of the British digital tech sector, not least finding the skilled staff to continue growing at this rate, as the UK prepares to leave the EU. London in particular has benefitted from migration, with 20% of startups staffed by EU nationals,” said Wendy Tan White, general partner at pre-seed investment programme Entrepreneur First.
“Whatever happens in the coming months, the UK must continue to be an attractive place for investors to want to put their money, prioritising support and infrastructure for the startup economy,” she added.
Wages and productivity
The shortage of talent means that those who do possess the necessary skills can demand healthy pay packets. The report found tech salaries are now, on average, 44% higher than salaries in non-digital jobs, with the average salary in the sector now sitting at £50,663.
Since 2012, there has been a 13% increase in the advertised salaries of digital tech posts, compared with only a 4% rise in those of non-digital jobs.
But the owners of UK tech firms are certainly getting their money’s worth. The Gross Value Added (Digital Economic Contribution) of a digital tech worker in the UK is now more than twice that of a non-digital worker (£103,000 compared to £50,000). This productivity gap between the digital tech sector and non-digital sectors has increased from £48,000 to £53,000 over the past five years.
Gerard Grech, CEO of Tech City UK, said: “Tech Nation 2017 shows how rapidly the UK’s tech innovation and productivity are gathering momentum. There are now significant tech hubs all over the UK, attracting both international investment and overseas talent.”
He reiterated that the UK tech sector needs to maintain access to skilled workers from across the EU and beyond, while also encouraging and inspiring home-grown tech talent.
“And we need to think big. This report is all about working together on a common vision: the UK as a global leader in tech,” Grech concluded.
Tech City News is accompanying Tech City UK on its Tech Nation tour. Keep your eyes peeled for further coverage and regional analysis.