UK’s 2018 Tech Sector Venture Investment Shows Sharp Drop

The UK’s tech sector attracted more venture capital investment and IPOs than any other European capital last year – even as investment dropped sharply when compared with record levels in 2017.

New figures published by London & Partners and PitchBook found the UK’s tech firms attracted a total of £2.49 billion in investment, dominated by London firms, with £1.8bn, or 72 percent of the total.

While that was far more than any other European country, with London receiving nearly double its nearest rival, the figure was sharply down on 2017, London & Partners said.

That was in part due to record figures for the year, fuelled by a number of very large deals, but the drop may still raise questions about the UK’s tech sector ahead of the country’s departure from the European Union.

Global hub

Likewise, strong investment growth in other European capitals may in part reflect efforts to build up the EU’s tech sector, as the EU prepares for a future without the UK.

“These figures demonstrate that London is going from strength to strength as a global hub for technology, innovation and creativity,” said London’s deputy mayor for business, Rajesh Agrawal, in a statement.

London & Partners chief executive Laura Citron singled out high-growth sectors such as fintech, artificial intelligence and big data as indicating the health of London’s tech sector.

“Our research shows that London is producing game-changing companies and ideas to change the world,” she stated.

Firms dealing with big data, AI and blockchain technologies received record investment last year, topping that received by firms in the same sectors in other European capitals.

Last year’s £2.49bn in UK tech venture capital was a significant drop from the £3.12bn received in 2017, but still represented nearly double 2016’s £1.5bn.

Record AI investment

The UK’s AI companies received their highest venture capital investment yet at £736m, or 47 percent over the £499m raised in 2017, boosted by a number of large deals, including funding rounds for AI-based online travel firm Culture Trip and AI chipmaker Graphcore.

Cryptocurrency and blockchain investment saw record growth last year, with UK firms receiving more than £200m in venture funding compared to the £19.11m received in 2017 and 2016’s £51.96m.

London-based fintech companies, for their part, raised more than £1.08bn, or 90 percent of the total of £1.17bn received by UK fintech firms last year.

European capitals show gains

London’s £1.8bn in 2018 venture capital was far more than the £936.53m invested in second-runner Berlin or Paris’ £797.04m.

But Berlin saw strong funding growth, while Paris and France gained momentum with French tech firms raising more than £1bn in 2018, compared with £748m the previous year.

Total European venture funding showed a slight decrease compared with 2017’s £10.47bn, with £10.44bn raised in 2018.

But London & Partners noted that European venture funding levels last year were still up on those seen in 2013 to 2016.