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What’s next for UK Tech?

Emerging Growth Insights and the Fast 50

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Emerging Growth Insights and the Fast 50

The number of high‑growth tech companies in the UK has more than tripled in the last decade. Today, the UK is one of Europe’s leading tech ecosystems, with over 20,000 high‑growth companies. As the UK strives to cement itself as a tech superpower by 2030, it must overcome various challenges, from international competition to shifting economic conditions.

Two key areas this article will explore are the role of listings and whether the UK continues to provide a competitive landscape for initial public offerings (IPOs). Listing on a stock exchange is a momentous achievement for a company, but not without challenges. Assessing the UK’s attractiveness as a listing destination is one way of measuring the overall strength and direction of the sector.

The golden triangle of London, Oxford, and Cambridge is a key focal point for the UK’s tech sector. Investment in these areas accounted for 68.3% of total investment in high‑growth companies in 2023. London alone attracted 132 foreign direct investment projects, reflecting its position as the leading European city for digital technology investments.1 London’s supportive cluster of academia, law, and financial services makes it a global competitor in the tech scene. This is reflected by 35 of the Fast 50 cohort having their head offices in London. Following London, Cambridge and Oxford both have world‑renowned life sciences and deep tech ecosystems. Beauhurst data reveals that University of Cambridge spinouts have raised £2.44b in equity over the past decade.

As Deloitte’s Emerging Growth Companies Cambridge lead partner, Julian Rae, puts it, “The Cambridge‑Oxford Arc or “Supercluster” demonstrates the significance and value of clustering in the tech sector. Cambridge has long been the home of innovation and growth in UK technology with a sophisticated ecosystem built around early stage companies.

This has led to the city punching well above its weight in the historic Fast 50 rankings and producing multiple generations of unicorns and high growth companies.”

Equity investment in high-growth tech companies (2019 - Q3 2024)

"Cambridge has long punched well above its weight in the historic Fast 50 rankings, and has produced multiple generations of unicorns and high growth companies."

 

Julian Rae, Partner, Deloitte

 

Other regional cities are rapidly emerging as tech clusters. Birmingham’s tech population has surged, growing 152% between 2014 and 2023. This year, Bruntwood SciTech announced a £4.50m project to create a major tech hub in Birmingham’s city centre to drive innovation and collaboration.2  Manchester, another rapidly growing tech hub has produced unicorns such as pharmaceutical company Orchard Therapeutics. In 2023, subsidiaries of the University of Manchester and the University of Cambridge, alongside Bruntwood SciTech, launched the Cross‑UK Innovation Cluster. The Cluster will foster collaboration between academia and industry between the two cities.3  These expanding clusters show that the UK’s tech ecosystem is growing beyond London and the South East. The new government’s policies will be crucial in supporting this regional development and shaping the landscape for investment in the UK’s tech ecosystem.

As tech clusters expand nationwide, the landscape for investment and exits becomes increasingly critical. A promising sign is that the UK has witnessed several high‑profile tech exits in 2024. Raspberry Pi’s successful listing on the London Stock Exchange signals optimism, especially following microchip company Arm’s decision to list in the US in 2023. Starling Bank is also rumoured to be considering an IPO. However, not all companies are satisfied with the UK as their base. Pharmaceutical company Indivior moved its shares from the LSE to the NASDAQ stock exchange in June 2024. Previous Fast 50 winner, Revolut, has also suggested ambitions to list in New York.4

There are several reasons why companies in the UK’s tech ecosystem might list elsewhere. The US, the UK’s main competitor, offers larger financial markets, greater access to capital, and a favourable regulatory environment for specific industries. That said, reforms to the UK’s Financial Conduct Authority (FCA) listing regime have been seen as a positive step toward attracting more companies to list domestically. Revolut Chair Martin Gilbert praised the FCA’s reformed regime for offering founder‑led companies more choices, suggesting the door is still open for a London IPO.5

Reforms to the UK’s Financial Conduct Authority (FCA) listing regime have been seen as a positive step toward attracting more companies to list domestically.

In the coming years, the UK’s attractiveness as a listing destination will be defined by how government policy, academia, and businesses interact to create a supportive tech ecosystem. Following Labour’s victory, Prime Minister Keir Starmer has stated that the UK is “open for business.” His government has announced initiatives to boost the innovation ecosystem, focusing on artificial intelligence, green technologies, and FinTech. The launch of a £7.30b National Wealth Fund, dedicated to early‑stage and scaling companies in these sectors, is a significant step.6  Labour has also relaxed planning restrictions on data centres to ensure the UK is equipped to handle the demands of artificial intelligence. Already, there are signs that these efforts are yielding results. Private equity firm Blackstone announced a £10b investment in an AI data centre in the North East of England.7  However, concerns remain over the government’s recent rollback of R&D tax credits, which has reduced funding availability to startups. There are also potential changes to capital gains tax, which may further impact scaling tech companies.

The future of the UK’s IPO market is uncertain. While financial markets have been more subdued in recent years, there are signs of a recovery both in funding and exit figures. An encouraging sign is that The Bank of England (BoE) recently reduced the interest rate by 0.25% to 5%—its first reduction since 2020.8  This modest cut acts as a signal that there could be further reductions in the future. This would provide a much‑needed liquidity boost and encourage investment, allowing greater opportunities for tech companies to scale. Alongside interest rate cuts, the 2023 Mansion House reforms aim to increase funding liquidity by directing domestic pension funds into UK companies, bolstering their ability to scale domestically.

As 2024’s Fast 50 champions illustrate, the UK continues to lead in tech innovation. However, the country’s success will depend on addressing the structural challenges facing the sector, from fostering domestic exits to improving funding and infrastructure. The impact of new government policies on the IPO market, M&A activity, and overall investment will become clearer in the coming years. For now, the formation of new tech clusters across the UK regions, interest cuts by the BoE, and the market reforms by the FCA offer reasons for optimism.

In the coming years, the UK’s attractiveness as a listing destination will be defined by how government policy, academia, and businesses interact to create a supportive tech ecosystem.

Regional overview

London has the highest population of high‑growth tech firms of any region in the UK, with 8,086 companies. The South East follows with 2,625 high‑growth firms. The city of Oxford is a key innovation hub in the region, with companies also benefitting from their proximity to London and Cambridge, the other cities that make up the golden triangle. The area is anchored by a world‑class academic and research sector, which has produced numerous successful academic spinouts. Institutions such as the Oxford Science Park and Culham Science Centre support businesses in the South East via their state‑of‑the‑art research and development facilities.

Another significant hub is Manchester, with 344 high‑growth tech companies. The city is home to six tech unicorns and is one of the top startup hubs in the UK. With one of the largest student populations in Europe, Manchester is rich in talent, investment opportunities, and pioneering research.9

 
Investment in high‑growth tech companies by region
 

Over the last decade, the UK’s technology sector has not only grown in terms of the number of deals being done but has also seen an expansion in the magnitude of individual deals, with specific regions becoming focal points for substantial equity investment. Beyond London, the East of England and the South East have the highest population of companies securing investment. Equity funding in the East of England rose from £294m in 2014 to over £2.14b in 2021—an increase of more than sevenfold. This surge is partly attributable to a rise in the number of high‑growth tech companies located in the East of England as well as the general rise in equity investment into tech companies. Companies in the East of England benefit from the region’s dynamic startup and spinout landscape, which brings together academia and business. Companiesalso gain direct access to top‑tier research facilities like the Cambridge Science Park, the Babraham Research Campus and the Cambridge Biomedical Campus.

Northern Ireland has also shown notable growth, with tech companies securing £120m in 2022, up from £22.6m in 2014. The low investment amount seen in 2014 helps to explain the high growth that companies in Northern Ireland have seen in equity investment. Belfast is emerging as one of the fastest‑growing tech hubs in the UK, supported by entities such as Catalyst, which provides vital business support to local companies, as well as Queen’s University Belfast and Invest Northern Ireland, the region’s economic development agency.

1. Seattle Doole,“The UK remains Europe’s leading destination for Foreign Direct Investment in Digital Technology”, EY, 10 June 2024 https://www.ey.com/en_uk/newsroom/2024/06/uk-remains-europe-s-leading-destination-for-fdi-in-tech

2. Emma Woollacott, “Bruntwood SciTech begins work on new Birmingham tech hub”, ITPro, 3 July 2024 https://www.itpro.com/business/bruntwood-scitech-begins-work-on-new-birmingham-tech-hub

3. Cambridge Enterprise, “Cambridge and Manchester launch new cross‑UK innovation cluster to boost growth”, 11 October 2023 https://www.enterprise.cam.ac.uk/news/cambridge-and-manchester-launch-new-cross-uk-innovation-cluster-to-boost-growth/

4. Emma Dunkley, Anita Quinio, “UK government woos Revolut as fintech favours US for potential IPO”, Financial Times, 16 August 2024 https://on.ft.com/4cswYRO

5. Ibid

6. HM Treasury, “Boost for new National Wealth Fund to unlock private investment”, GOV.UK, 9 July 2024 https://www.gov.uk/government/news/boost-for-new-national-wealth-fund-to-unlock-private-investment

7. Reuters, “Blackstone confirms $13 billion investment in Britain for AI data centre”, Reuters, 26 September 2024 https://www.reuters.com/technology/artificial-intelligence/blackstone-confirms-13-bln-investment-britain-ai-data-centre-2024-09-25/

8. Bank of England, “Bank Rate Reduced to 5% – August 2024.” Bank of England, 01 August 2024
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2024/august-2024

9. The Complete University Guide. “Universities in Manchester.” The Complete University Guide, 2024, accessed from

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