More money than ever flowed into the UK tech sector in 2021 with the government revealing there were more unicorns, more jobs and more futurecorns.
According to new analysis for the UK’s Digital Economy Council by Dealroom and the job search engine Adzuna, investment was £29.4 billion this year, up 2.3x from last year’s figure of £11.5 billion.
Almost £9 billion 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 billion, after the biggest year-on-year increase since 2013/14.
The Department for Digital, Culture, Media & Sport (DCMS) called it the “best year ever”.
Gerard Grech, founding Chief Executive, Tech Nation, adds: “With such a record tech investment year, it’s becoming increasingly evident that the UK is very good at rearing and cultivating startups and scaleups into successful global companies right across the UK, unlike its continental European neighbours, where it tends to be more in capital cities.”
Cambridge is the leading regional tech city in the UK due 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 [£758 million]) and futurecorns.
Manchester was only narrowly beaten by Cambridge to the number two position. 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.
Oxford came in third, followed by Edinburgh, Bristol, Leeds, Birmingham, Newcastle, Cardiff and Belfast.
The DCMS is in a triumphant mood. It explains that the £29.4 billion raised by UK startups and scaleups was double the figure raised in Germany (£14.7 billion) and almost three times that raised by French 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.
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 healthtech 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.
In terms of unicorns, 29 were created this year including insurance firm Marshmallow and challenger 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.
Nine out of the 29 unicorns created this year are outside of London including investment platform interactive investor in Glasgow. Earlier this month, abrdn said it will acquire interactive investor for £1.49 billion. Of all the unicorns created in the UK, 35% are outside of London and 35% of futurecorns are also based outside of the capital.
When it comes to the London markets, 118 companies chose to list in the UK raising over £16.8 billion (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 billion 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 £31 billion. The London Stock Exchange has also supported 30 founder-led companies to list this year.
“Standout performers” were Oxford Nanopore and Wise. The value of UK tech companies that exited via IPO, SPAC or acquisition reached a record £84 billion, in a year which saw IPOs and SPAC listings for companies including Darktrace.
The DCMS talked about more job opportunities in London and beyond.
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.
According to the UK government, it will invest £20 billion in R&D by 2024-25 to support research institutions, universities and businesses. It is aiming to invest £22 billion by 2026-27.
There has also been increased private investment in deep tech firms, totalling £6.2 billion in 2021, up from £2.8 billion in 2020. One of the biggest deep tech deals of the year was the £396 million Series D raise by AI drug discovery company Exscientia, of Oxford, which helped the company achieve unicorn status.