UK tech sector achieves best year ever, reveals new analysis
Cambridge is the leading regional tech city in the UK thanks to its combination of high levels of VC funding, venture capital rounds, advertised tech salaries, number of unicorns (tech companies worth more than $1 billion) and futurecorns, according to new analysis for the UK’s Digital Economy Council by Dealroom and the smarter job search engine Adzuna.
Manchester was only narrowly beaten by Cambridge to the number two position, and Edinburgh, Cardiff and Belfast are also in the top ten for capital raised, showing how the tech sector has spread across all regions and countries in the United Kingdom. The number of jobs in Manchester increased by 164.6% in 2021 and the highest advertised average salaries outside London were in Edinburgh – £58,405.
With more money than ever flowing into UK tech – £29.4 billion this year, up 2.3x from last year’s figures of £11.5 billion – almost £9bn of all VC invested went into startups and scaleups outside London and the South East and the regions are home to nine of the 29 unicorns formed this year. The combined value of UK tech companies founded since 2000* is now £540 bn, after the biggest year-on-year increase since 2013/14.
Levelling Up Power Tech League 2021
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- Cambridge
- Manchester
- Oxford
- Edinburgh
- Bristol
- Leeds
- Birmingham
- Newcastle
- Cardiff
- Belfast
Record investment in UK tech
This regional growth took place against the backdrop of an incredible year for the UK tech industry. Tech investment grew 2.3x this year, the highest growth since 2013 to 2014 when it grew from $2 billion (£1.5 billion) to $4.6 billion (£3.5) billion.
UK tech captured more than a third of investment into Europe
The £29.4bn raised by UK startups and scale-ups was double the figure raised in Germany (£14.7billion) and almost three times that raised by France companies (£9.7 billion). UK tech investment accounted for a third of the total £89.5 billion that flowed into the European tech ecosystem this year.
UK venture capital firms have also had a record year and raised £7 billion with record-breaking fundraisings from London firms including Index Ventures, Balderton Capital, 83North and Eight Road Ventures.
More US investment
The majority of the money coming into UK tech is from the US, with 37% of all funding coming from the States, up from 31.5% last year, with the majority of it going into fintech and health tech companies. Over 28% of UK venture funding came from domestic capital. Competition for deals among VC funds is heating up as more US venture funds launch offices in the UK, including Bessemer Venture Partners, General Catalyst, Lightspeed Venture Partners and Sequoia Capital.
More unicorns created than ever before + more than France and Germany combined
More funding means more unicorns, with 29 created this year including the e-commerce platform Depop, car selling platform Motorway, insurance disrupter Marshmallow, and the challenger bank Starling Bank. This takes the UK’s total unicorn figure to 115 meaning 25% of the UK’s total unicorns were created in 2021 alone. The UK has more unicorns than France (31) and Germany (56) combined.
30% of new unicorns created this year are outside of London
Nine out of the 29 unicorns created this year are outside of London including Interactive Investor in Glasgow, Vertical Aerospace in Bristol and Touchlight Genetics in Hampton. Of all the unicorns created in the UK, 35% are outside of London and 35% of futurecorns are also based outside of the capital, suggesting that the growth in tech in the regions will continue strongly in the next five years.
Record IPO capital raising in London since 2007
The publication of Lord Hill’s UK Listings Review in March supported a strong year for the London markets, with 118 companies choosing to list in the UK raising over £16.8bn (YTD), the most capital raised since 2007. This made the UK the most active venue globally for IPOs outside the US and Greater China.
The London Stock Exchange has hosted more than twice as many transactions as the next most active European market, with a combined £49.0bn raised through IPOs and Follow-On Issuance. The 37 tech and consumer internet companies that have listed this year achieved a combined market cap of £31bn. The London Stock Exchange has also supported 30 founder-led companies to list this year.
Standout performers such as Oxford Nanopore and Wise have demonstrated the significant appetite from investors for quoted high-growth companies and this positive momentum is set to continue into 2022. The value of UK tech companies that exited via IPO, SPAC or acquisition reached a record £84bn, in a year which saw IPOs and SPAC listings for companies including Deliveroo, Darktrace, Cazoo, Arrival, Babylon and Depop.
More job opportunities in London and outside
The increased levels of money going into UK tech also mean companies are in need of trained technical and business staff. There has been a 50% rise in overall UK tech job vacancies advertised this year compared to 2020’s figures, with advertised tech vacancies hitting 160,887 in November. Currently, tech vacancies make up 12% of all available jobs in the UK, with just over 50% of these jobs available outside of London and the South East.
Software developers are still the most in-demand tech job across the UK. These positions make up 9% of all tech jobs with prospective developers being offered an average salary of £64,318, a 12% increase on 2020’s figures. Specialist staff such as java developers and IT systems architects continue to be able to command high salaries with the average advertised wage for these roles being £80,076 and £93,004 respectively.
Remote jobs spread tech success
The UK tech industry continues to lead the way when it comes to hiring practices since technical jobs are well positioned to be carried out remotely. In fact, 21.6% of all job ads in the IT sector are advertised as remote roles. This is also contributing to the spread of the UK tech ecosystem beyond London as businesses can hire across the country and find the staff that they need, regardless of location.
Increase in R&D
The government has increased its investment in R&D to £20bn by 2024-25, in order to support the UK’s research institutions, universities and businesses with an aim to increase this to £22bn by 2026-27. This investment is aimed at securing the UK’s future as a global science superpower, supporting businesses as they transition to becoming more innovative and productive and creating highly skilled jobs across the country. At the same time, there has been increased private investment in deep tech firms, totalling £6.2bn in 2021, up from £2.8bn in 2020. One of the biggest deep tech deals of the year was the £396m Series D raise by AI drug discovery company Exscientia, of Oxford, which helped the company achieve unicorn status.
Digital Minister Chris Philp yesterday said:
“It’s been another record-breaking year for UK tech with innovative British startups helping solve some of the world’s biggest challenges.
Capitalising on this fantastic investment across the country is a crucial part of our mission to level up, so we are supporting businesses with pro-innovation policies and helping people to get the skills they need to thrive in this dynamic industry.”
Saul Klein, partner and co-founder at LocalGlobe, yesterday said:
“It’s taken 20 years for UK tech to get to the starting line and things start to get interesting in the next 20 years. We have all the ingredients to become the leading tech ecosystem in the world, with record levels of R&D, financing and established tech hubs across the country from New Palo Alto in Kings Cross, to Cambridge, Edinburgh and Manchester. But the key differentiator for investors in future will be a willingness to take an ethical approach to building businesses. We can be world-class in this and over the long term this will set our companies apart from those built in the US and China.”
Gerard Grech, founding Chief Executive, Tech Nation, yesterday said:
“With such a record tech investment year, it’s becoming increasingly evident that the UK is very good at rearing and cultivating startups and scale-ups into successful global companies right across the UK, unlike its continental European neighbours, where it tends to be more in capital cities. A true network of digital excellence is emerging right across the country through entrepreneurship, driving new job and wealth creation. Tech Nation is committed to identifying and fuelling the growth of these high-potential businesses through its programs and initiatives, removing geographic and financial barriers as quickly as possible.”
About DEC
The Digital Economy Council is a non-statutory advisory committee of independent members set up to provide advice to the government. Its purpose is to harness the expertise of industry and the wider tech community to develop a world-leading digital economy that works for everyone.
About Dealroom
Dealroom.co is the foremost data provider on startups, growth companies and tech ecosystems in Europe and around the globe. Founded in Amsterdam in 2013, Dealroom.co now works with many of the world’s most prominent investors, entrepreneurs and government organizations to provide transparency, analysis and insights on startups and venture capital activity.
About Adzuna
Adzuna is a smarter, more transparent job search engine used by tens of millions of visitors per month. We love using the awesome power of technology to bring together every job in one place, help match people to better, more fulfilling jobs and keep Britain working.
Adzuna supplies real-time data to the Number 10 Dashboard, the Cabinet Office and Office for National Statistics labour market indices. In 2018, Adzuna won the contract to run Find a job, one of the British government’s most used online services.
Adzuna.co.uk was founded in 2011 by Andrew Hunter and Doug Monro, formerly of eBay, Gumtree, Qype and Zoopla and is backed by leading Venture Capital firms Passion Capital, LocalGlobe, Index Ventures and Smedvig Capital. It has spent a decade developing smarter, more transparent job search so jobseekers worldwide (in 16 countries) can zero in on the right role faster.
Methodology
To create the Levelling Up Power Tech League we gathered data for each city on venture capital (VC) funding, the number of VC rounds, the number of available jobs, the average salary, the number of Unicorns and the number of Futurecorns for each of the regions. For each category, we ranked each region from 1 to 10. We then calculated the sum of the rankings for each category within each region, and the region with the lowest overall ranking was the winner.
