We spoke with CEOs, CFOs, and other top executives from the UK’s high-growth tech sector to discuss the obstacles their companies are facing this year and the strategies they’re employing to overcome them.
Capital raising challenges
With 63.3% of respondents highlighting it, capital raising has emerged as a pressing priority for high-growth technology companies. A substantial 67.3% of companies are either actively trying to raise or have tried to raise investment in the past 12 months. In comparison to Q3 last year, high-growth tech companies have seen a 49.8% decrease in total equity investment secured this year. UK high-growth tech companies collectively raised £16.6b in the first three quarters of last year, with the equivalent figure for this year at £8.35b. Companies report that securing equity investment has been challenging due to a variety of factors, including high monthly burn rates and economic conditions constraining growth. Other difficulties include stringent investor focus on profitability over growth, unfavourable terms in offers, and decreased valuations compared to previous rounds. Overall, the current investment landscape appears to be highly cautious and investor-centric.
“As we draw conclusions from this year’s survey, one thing is evident: the UK’s tech industry is a landscape of contrasts. Challenges are met with innovative solutions; expansion plans are balanced with workforce needs and the macroeconomic environment, there is also a collective push for government support.”
Customer acquisition and business strategies
Naturally, customer acquisition is also on leaders’ minds, with 61.2% indicating that this was a key focus for their company. This finding fits with the broader mood across the economy, with the purchasing managers’ index showing that UK business activity contracted for the third consecutive month in October, impacted by high interest rates and falling exports. Companies have adapted their strategy to this reality, with 71.4% of companies indicating their current strategy is a balance between growth and cash preservation. Only 12.2% of the high-growth tech companies that responded indicated that they were prioritising growth alone.
AI’s growing impact
Against a challenging environment, leaders have a powerful new tool: Artificial Intelligence. Our survey found that 79.6% of companies expect AI to have an impact on their markets or proposition, underlining the need for tech companies across subsectors to be AI-ready. This readiness is not just about implementing new technologies; it is about optimising existing processes and customer engagement models to make the most of what AI can offer.
Global expansion trends
When it comes to global expansion, the old adage “West is best” still holds some truth. The US is the most popular destination for companies looking to expand overseas in the next one to two years, with 61.2% identifying it as a focus. Europe, including the Nordics, was a runner-up, with 49% of companies indicating the region is a focus over the next one to two years. It is not all about established markets; some firms are also setting their sights on emerging regions like the Middle East and the Asia-Pacific. Interestingly, a small but significant portion of respondents have no plans to expand internationally, suggesting a calculated focus on domestic growth.
Talent acquisition and retention strategies
In the ongoing battle for top talent, flexible work arrangements are becoming increasingly important. According to respondents, 59.2% of companies have adopted flexible working hours as part of their strategy, while 84.7% operate under a hybrid model. Some progressive organisations have even transitioned to a four-day workweek to enhance employee well-being. Dave Weir, founder and CEO of this year’s Scotland Regional Winner, The Original Fit Factory, is no stranger to this approach: “A lot of the things that companies do now, we did years ago. We moved to the four and a half day a week probably three years ago.” While many companies have embraced more flexible working, a minority believe that innovation and collaboration are best achieved in a physical workspace alone, challenging the shift to hybrid working. Another key factor in hiring and retention is a company’s sense of social or environmental responsibility. A significant 87.5% of respondents reported that their business identifies, to some extent, with having a social, societal, or environmental purpose.
Government support and policy outlook
Of the companies surveyed, an incredible 91.8% have used government growth support schemes such as grants, R&D tax credits and the Patent Box scheme. Given the option to respond freely on government steps to support businesses, survey respondents advocated for a range of government interventions to bolster growth and innovation in the UK. Key areas span from streamlined tax incentives, particularly for R&D, to reduced corporation tax and simplified public procurement for SMEs. Looking ahead, firms anticipate that transparent and stable decision-making, sector-specific regulations in areas like electric vehicles and AI, and a focus on sustainability could significantly benefit their operations. There is significant concern around a potential Labour government’s changes to the corporation tax regime, with 37.5% of respondents anticipating that such changes would impact them negatively. There is also a call for international data transfer legislation and ongoing R&D incentives. Collectively, the emphasis is on establishing a stable yet progressive policy environment to facilitate business scalability and innovation.
Conclusion
As we draw conclusions from this year’s survey, one thing is evident: the UK’s tech industry is a landscape of contrasts. Challenges are met with innovative solutions; expansion plans are balanced with workforce needs and the macroeconomic environment, there is also a collective push for government support. These are not just isolated strategies; they are part of a larger tapestry of resilience and innovation that defines the sector.
As the UK’s tech sector continues to grow, adaptability remains its greatest asset. Whether it is harnessing the power of AI, embracing flexible work models, or navigating the intricacies of international trade, the industry’s leaders are clear-eyed about the challenges that lie ahead and how they plan to overcome them.