Tech Nation report shows UK tech boomed in 2020
Tech Nation, the leading scaleup accelerator, released its annual Tech Nation Report yesterday (March 16), which provides a detail analysis of the UK tech sector.
Now its 7th year, the report reveals how the sector has changed in 2020, who the top performers were, and the challenges and opportunities the UK faces as it navigates out of the pandemic and leaving the EU.
Despite such an unprecedented year, the report shows a very positive outlook for the tech industry with an record breaking year in investment and a host of stand-out tech companies thriving in 2020. Here, we look at some of the report’s highlights…
Scaleup superstars of 2020
In 2020, the UK tech scaleup ecosystem continued its strong growth. Valued at $585bn, startups and scaleups more than doubled (120%) their collective value since 2017.
Driving UK tech into new heights in 2020 were 10 superstar scaleups, which between them secured 20% of total UK tech VC investment, at $3.5bn.
- Octopus Energy
- Karma Kitchen
- Zenobe Energy
Octopus Energy, Arrival, Cazoo, Gymshark, infobip, Gousto and Hopin were the seven unicorns to make it into the unicorn class of 2020, bringing the UK’s total unicorn count in 2020 to 80. And an additional 6 unicorns have already been created so far in 2021, Blockchain, Kymab, PPRO, Touchlight Genetics, Starling Bank and Zego.
Tech IPOs gather pace
Despite uncertainty caused by the pandemic, UK Tech IPOs gained strong momentum in 2020, signalling the UK’s attractiveness for tech companies and the continued health of the UK late-stage tech ecosystem. Eight of the UK’s tech companies IPO’d on the LSE in 2020, raising a total of £3.1bn.
When compared with 2018, 2020 had double the amount of capital raised through IPOs. A notable highlight in 2020 was Manchester-HQ’d The Hut Group’s IPO (THG), Europe’s largest-ever eCommerce IPO, which raised £1.9bn at a market capitalisation of £5.4bn.
Record-breaking tech investment in 2020 with the UK once again leading Europe
There was also a record level of VC investment in 2020 into UK tech companies, despite the backdrop of the global pandemic. Investment reached $15bn, $200mn higher than 2019’s record breaking year. Investment gained momentum throughout 2020, reaching a peak in December 2020 at $1.9bn. The UK hubs driving investment were London, Oxford, Bristol, Cambridge and Edinburgh.
This places the UK third highest globally, behind the US ($144.3bn) and China ($44.6bn)
Tech sectors to watch
The report reveals a surprising UK sector champion - transport tech - which had a 160% boom in VC investment in 2020. This was driven by companies such as Arrival, which netted $400m in Growth Equity, and investments into scaling companies made in the second half of 2020, such as Marshmallow, Cazoo, Freeflow Technologies, and Elmtronics, which signal the burgeoning demand for disruptive technologies to innovate in the transport sector.
VC investment in deeptech also increased by 17%, rising to just under $4bn, and investment into Net Zero was shown to have more than doubled (160%) since 2018 to $2.6bn.
On the other hand, while the UK is still second in the world for VC investment into fintech - VC investment dropped by 23% to $4.5bn.
The next decade - challenges that lie ahead
While the rate of tech GVA contribution to the UK economy has grown on average by 7% per year since 2016, the industry still faces significant challenges, which the report highlights, including:
- Global capital flows - in 2020, non-UK investment represented 63% of total VC funding of UK tech and for later stage investments, this was even more pronounced. This indicates that UK tech firms will increasingly become majority-owned by non-UK actors in the future, which could potentially create a shortfall of late-stage domestic investors.
- Lack of VC investment into UK regions - the percentage of total UK VC investment made into London has increased from 73% to 88% between 2018 and 2021. The report suggests, regions must be supported in their growth journey by the development of more targeted regional investment funds to create a more equal playing field for companies outside London.
- R&D shortfalls - data from the ONS finds that UK R&D expenditure (public and private spending) was just under £30bn in 2018. This compares to total US R&D expenditure in 2018 reaching $551bn and China’s R&D expenditure reaching $463bn. The Tech Nation report recommends that the UK should find ways to ramp up the R&D intensive capabilities to stay competitive.
On the report’s release, Prime Minister Boris Johnson said: “The UK is maintaining its lead as one of the world’s premier centres for tech of all kinds. While the real credit lies, as ever, with the engineers and designers toiling away at laptops across the country, I’m immensely proud to lead a government that is so comprehensively committed to supporting the sector. We’re continuing to invest in your success, and I hope that the winning combination of UK tech and this government will lead us to yet another record-breaking year in 2021.”
Gerard Grech, founding chief executive, Tech Nation, added: “This year has highlighted the UK tech sector’s enormous resilience and world-beating innovative spirit. In the face of a major global crisis, it has not only survived; in many areas, it has boomed.”
You can read the full report here