London’s iconic financial district Canary Wharf.
Chris Ratcliffe | Bloomberg via Getty Images
Investment in the U.K.’s technology sector grew at a faster pace than in the U.S. and China last year, according to new research released Wednesday.
Venture capital funding for British start-ups grew 44% to a record $13.2 billion in 2019, a report prepared for the government by industry group Tech Nation and research firm Dealroom said.
By contrast, Dealroom’s figures show that investment in U.S. and Chinese tech firms actually slowed from January to December, with the U.S. seeing a 20% decline and China a steeper fall of 65%. The U.S. and China still came out on top in terms of total deal value, however, attracting $116 billion and $33.5 billion respectively.
The stats showed that nearly half of the total amount invested in U.K. tech came from U.S. and Asian investors. Last year, foreign investors flocked to the U.K. and Europe in search of cheaper valuations amid growing interest in burgeoning areas like fintech. Start-ups like challenger bank Monzo and online payments firm Klarna attracted huge nine-figure deals led by U.S. investors.
But fintech wasn’t the only sector seeing significant growth. Emerging industries like artificial intelligence, so-called “deep tech” and clean energy also saw huge inflows. Health firm Benevolent AI raised $90 million and virtual reality company Melody raised $60 million, while in energy Ovo raised $260 million from investors.
“The U.K. and Europe quite frankly have over the last 20 years mainly seen on the sidelines of the global tech economy,” Saul Klein, co-founder of early stage venture fund LocalGlobe, told CNBC in an interview. “It’s taken about 20 years to get here and the data now supports that the U.K. is a major global tech player.”
What’s behind the growth of UK tech?
Britain accounted for a third of the almost $40 billion injected into European tech companies last year, according to Dealroom data. But that’s not to say countries across the continent haven’t also experienced significant growth. Investment in German start-ups grew 41% to $7 billion in 2019 while French tech investment grew 37% to $5.2 billion.
Still, Britain’s total deal amount far outstripped that of its continental rivals with $13.2 billion invested in the country’s tech start-ups.
“The most attractive thing about investing in Britain is the package,” Matt Warman, digital minister for the U.K., told CNBC. He said the U.K. had a supportive business environment, geography and language as well as some of the world’s top schools to thank for the growth of its tech sector.
It’s also worth noting that the booming interest in British tech firms came against a backdrop of a U.S.-China trade rift that has dragged in the tech industry. U.K. officials are set to decide later this month on whether to allow Huawei access to its 5G networks, a crucial decision which has been clouded by U.S. lobbying efforts to block the Chinese tech giant.