Investment in tech startups and scaleups has reached record levels, and is set to increase even more over the next year
Q1 2021 was an all-time quarterly investment record for the UK, with VC tech investment reaching $7.6bn (a 124% increase on Q1 2020 [$3.4bn] and Q4 of 2020 [$4.8bn], which was the previous record holder). Large, late stage rounds are now dominating the VC landscape in the UK, more than half of all investment now comes from rounds of over $100m. Seed stage investment remains strong, despite relative decreases over recent years - from 14% of total VC investment in 2015 to 6% in 2021, the absolute amount of investment being made has grown.
London is in the leading pack of global tech cities. It was fourth for tech VC investment globally behind San Francisco, Beijing and New York at $10.6bn in 2020
In 2020 US cities pushed European counterparts down the rankings – with Berlin moving from eighth to 16th, and Paris from 13th to 15th place. However, London held its position at fourth in the world for VC investment in tech, showing its strength as a resilient, global tech hub.
UK tech investment is set to continue rising, there is a record amount of dry powder available, after $8.5bn was raised in new funds in 2020.
This fundraising activity is an all-time record, and mirrors the positive trends in investment being made into tech firms. This means that a company setting up in the UK may stand a better chance of receiving domestic investment, and support from a local set of advisors and champions.
However, international investors continue to put their money into UK tech at an unprecedented rate.
The UK is a global investment hotspot. International investors were involved in 63% of all rounds raised by UK tech startups and scaleups in 2020
The UK is third in the world for investment into impact tech, which has increased 160% since 2018 while in the US it rose by 15% over the same period
The rate at which the UK is creating tech unicorns gives a sense of broader ecosystem health, and the underlying infrastructure required to take a business to globally competitive levels. Investment, talent, and international expansion are key challenges faced by high growth tech companies, and the UK is providing fertile ground for their development.
The UK tech startup and scaleup ecosystem is valued at $585bn – more than double the next most valuable ecosystem, Germany, at $291bn
There are nearly three million jobs in the digital tech economy, more than either Construction (1.9m) or Financial Services (1.2m)
Digital economy jobs increased by 40% from 2017 to 2019, taking the total number of people working in the digital economy to over 2.98m. Showing the depth and breadth of tech opportunities in the UK, both within tech companies and outside of them; in technical, and non technical roles.
UK cities outside of Greater London offer cost effective places to live and work as a tech professional
The cost of living is an essential factor taken into account when deciding upon a career and a place to live. The Jobs and skills report 2020 evaluated cost of living and salaries for jobs in UK tech to develop a deep sense of where one's money will go furthest as a tech worker.
IT System architects have seen the largest absolute increase in salary over recent years, by just under £8,000
But, looking at the median salary provided for particular digital tech roles and taking the cost of living into account. What city provides the best value for money?
We see various digital tech roles offer a varied median salary according to the skills needed and the level of expertise, this of course varies across clusters. So we take into account the roles one can have and where they live to provide an alternative ‘best’ place to live according to salary and cost of living within the city.
There are strong salary hotspots outside of London in many tech roles, opening up the entirety of the UK as fertile ground to work, or start a business.
London tends to offer highly paid opportunities, but other tech clusters punch well above their weight. Places paying above the UK median salary and the roles they exceed the UK benchmark for, include:
In 2021, over half of the world’s college graduates (54%) come from the top emerging markets (Brazil, China, India, Indonesia, Mexico, Russia and Turkey), compared with 46% from G7 countries (Canada, France, Germany, Italy, Japan, UK and US) (Oxford Economics, 2021).
Over the next decade, the percentage of college graduates will rise to 60% from those emerging economies
Around 217 million prospective skilled workers will be from emerging economies, compared to 143 million in the G7. Furthermore, it is likely that China will overtake the US as the country with the largest single pool of educated talent - shifting prospective tech talent flows to the UK over the next ten years (Oxford Economics, 2021).
It is critical that the UK maintains an emphasis on facilitating the movement of global talent to support the growth of the tech sector. As well established flows of talent change over the next decade, it will be increasingly important that the UK is positioned as 'open for business', and a location to be favoured for starting, scaling and staying in tech.
Adzuna data
Over 14 million rows of data was analysed, using Adzuna data covering the whole of 2019 and up to the 9th August 2020. This data contained information about advertised jobs, across 29 different categories. Summary statistics were performed on digital tech roles (IT jobs or Engineering jobs) to understand the salary offerings provided by employers.
Lower quartile, median, mean and upper quartile were calculated. Lower quartile represents the first quarter and Upper quartile represents three quarters of the way along the salary list.
Throughout the report, the median salary is used, this is to ensure we have a better understanding and accuracy of an average of all roles with digital tech offered from the very junior roles to the most senior roles. The median salary recorded has been rounded up to the nearest tens. The ‘average’ i.e. the mean is a common metric used, however this method reports more imbalanced figures as the average is skewed by the fewer higher earning roles, which does not give a realistic reflection of the salary offered for roles.
Dealroom
Dealroom data deals with venture capital investment and excludes debt, lending capital, grants, ICOs and other non-equity. Secondary rounds, buyouts, M&A and IPOs are also excluded. The data excludes biotech. Including biotech the UK and European investment data would make it much higher. Dealroom’s proprietary database and software aggregate data from multiple sources, including news flow aggregation and processing, web scraping and manual research. Data is verified and curated with an extensive manual process, augmented by data processing.
Office for National Statistics (jobs)
To measure the total number of tech and tech-enabled jobs across the economy, we used data from the Office for National Statistics (ONS) Annual Population Survey (APS). This is a survey-based sample of the UK population – on individual people rather than businesses. To get UK-wide data on people working in tech jobs from the survey, we have to make sure that the sample of people reflects the broader UK population – so we have to use multipliers from the ONS.
But this kind of analysis does not measure the number of direct jobs created by digital tech companies. To understand the impact and benefits of digital tech we need to have reliable data not only on the number of tech jobs across the economy but also performance and productivity indicators for the sector itself.
To do this, we use official data from the ONS Business Structure Database (BSD), which we also use to look at the performance of tech companies. This methodology allows us to have refined data that can be relied upon as the most accurate count of direct jobs created by the digital tech companies across the country.
The numbers are quite different in some cases. This is because one analysis looks exclusively at people working for digital tech companies, while the other looks at people working in tech jobs across the economy.
This report presents two different sets of stats on employment. This means that the economy-wide numbers should not be compared to the sector-wide ones. But we have used this year’s method to look back over time. If you want to compare employment in your local area, all the data you need is in the 2018 Tech Nation report.
The new 2019 analysis is based on a comprehensive look at all UK businesses that are PAYE or VAT registered.This means that using BDS data will provide us not only with the number of direct jobs created by tech companies but also helps us understand the performance of these companies. Viewed together, the two sets of data will help us understand all people working in digital tech.
The data on digital tech companies also contains financial information, as well as employment. This means that we can have reliable data on productivity. To get a true picture of jobs in digital tech, we need to look at performance, as well as quantity of jobs – this cannot be obtained from the APS alone.
Digital tech jobs – includes all people working in digital tech occupations, irrespective of the industry. For example, a software developer working in a retail company. (Source: ONS Annual Population Survey, Sept-Sept 2018-2019)
Digital tech jobs in digital tech – includes only people working in digital tech occupations in the digital tech industries. For example, a software developer working in a web development firm. (Source: ONS Annual Population Survey, Sept-Sept 2018-2019)
Jobs in digital tech – includes all people working in digital tech industries, including non-digital jobs. For example, an accountant working in a web development firm. (Source: ONS Business Structure Database Sept-Sept 2018-2019)
Cost of living (Numbeo)
Numbeo is described as ‘the world’s largest cost of living database’, this is the source used to get the cost of living ratios for the UK cities.