UK tech demonstrates resilience amid virus crisis
Tech Nation and Dealroom published a report for the Digital Economy Council. It highlights that investors are still active in the tech space, despite the challenges posed by COVID-19.
UK digital tech companies are still attracting investors and are still recruiting. Most of them declared being optimistic about their ability to navigate the crisis. On the investment side of things the UK outperforms all of its European neighbours.
The report shows that British tech companies are resilient with tens of thousands of jobs advertised in cities across the UK in 2019 and the start of 2020, with salaries continuing to grow well-above inflation in almost all regions.
London leads the way and is a global tech leader with London-based companies raising $4bn since the start of January, more than Paris, Stockholm, Berlin and Tel Aviv combined. But other regions including Scotland are also doing well with Glasgow and Edinburgh leading the way.
Digital Secretary Oliver Dowden said:
"The UK's tech sector has shown resilience in these challenging times and the levels of investment in the year to date have consolidated our Europe-leading position.
"We have a vast pool of talent in the country's digital and tech firms who have played a big part in supporting communities across the UK and beyond throughout the pandemic and I applaud them for their ongoing efforts.
"The government will continue to champion and support the sector as it navigates the months to come as we step up our Coronavirus recovery plans. We will back entrepreneurs, encourage innovators and help businesses make the most out of the opportunities the digital and tech world provides."
UK’s position of strength
The UK’s tech sector went into the coronavirus crisis in February in a strong position. From January to the end of May, tech companies raised $5.3bn, compared to a total raised in the rest of Europe of $4.1bn. However, there are concerns that many of these deals were agreed in principle before the onset of the virus, which has reset expectations. Capital inflows in the second half of the year are unlikely to be as strong as those in 2019, itself a record year.
In April, the Government unveiled its Future Fund of £250m of matched funding for startups, so that tech companies which are typically loss-making could access support. Equity backed small businesses right across the UK are developing vital innovative products and services that have the capacity to help the growth of our economy in the months ahead as we emerge into economic recovery. Yet many of these businesses need further support and investment to withstand the impact of the coronavirus crisis to ensure that they can survive and successfully continue to build and commercialise their innovations.
However, startups are fragile businesses and recent data gathered from 200+ companies for the venture capital community shows that:
Two-thirds expected revenues to drop by more than a quarter
39% of business to consumer companies saw March revenues drop by over 50%
A third of companies have slowed hiring, while almost a half have frozen hiring
Two-fifths of companies believe they have less than 12 months of funds
Gerard Grech, chief executive of Tech Nation: “Many businesses are adapting and innovating to support the fight against coronavirus, demonstrating the resilience and resourcefulness of the UK tech sector. Although we are seeing many tech companies closing key rounds of funding, the picture is being monitored closely at Tech Nation, especially across different parts of the country, where access to finance may not be as strong. These findings today confirm that the UK is well positioned to face the challenges that lie ahead and leave Covid-19 in a position of strength.”