Recent research has shown that UK Tech Companies have secured a staggering £5.5bn in foreign investment in the first seven months of this year.
UK Experiences Increased Foreign Investment In Tech Start-Ups In 2019
Recent research has shown that UK Tech Companies have secured a staggering £5.5bn in foreign investment in the first seven months of this year. The Department of Digital, Culture, Media, and Sport reported that the amount secured was more than the amount invested per capita in the US tech industry during the same period. According to experts, the weaker pound can be attributed to investors being drawn to tech investment in the UK, making it lead in terms of funding across the whole of Europe.
This study also reveals that US and Asian firms are among the firms that invested the most during this period. These two regions collectively spent $3.7bn, which is equivalent to £3.02bn and €3.31bn during the first seven months of 2019, which was more than the $2.9bn they have together invested in tech the previous year.
In contrast, the overall foreign direct investment (FDI) has hit a low in the UK, due to the uncertainty over Britain’s expected trading treaties with the European Union. Reports by the Department of International Trade show FDI hit a six-year low this June.
Britain’s culture secretary Nicky Morgan stated:
“These fantastic figures show the confidence overseas investors have in UK tech, with investment flows from the US and Asia at an all-time high.
“We have a long-standing reputation for innovation, and the statistics endorse our reputation as one of the best places in the world to start and grow a digital business.”
UK Companies are now frequently heading abroad to places such as Asia to raise capital for their investments.
The founder and managing director of elev8.vc, a Singapore bound venture capital fund Aditya Mathur revealed to have seen many requests from UK startups tapping the Asian market for funds.
He also notes that there has been an apparent increase in the rate of funding requests compared to the previous year.
“These UK startups want to access the Asian market because it is large and diverse. They also need an Asian tech investor to aid them in understanding these markets while providing the kind of financing that suits their needs.’’
Analysts suggest that it is not only the UK firms that are benefiting. Asian Investors also benefit from investing in startups as it helps them with ways to hedge against trade wars. All of this research has been pulled together by the company Dealroom:
“Foreign investment into both the US and Chinese tech sectors has gone down because of the trade war and because Europe has provided several attractive investment opportunities lately,” – Yoram Wijngaarde, founder and CEO of Dealroom.
Some of the recent hot deals comprise of an $800m investment by Softbank, a Japan investment to Britain’s Greensill. The Japan-bound investment company provides short and long term loans to firms for their operational needs. Softbank, together with Clermont Group, based in Singapore, invested $400m in UK firm OakNorth Bank. This is a digital-only bank that provides loans for SME companies.
In the meantime, Amazon was the biggest investor in Deliveroo’s latest round of funding, which raised a total of £450m. The funds, according to the food courier service Deliveroo, will be used for international expansion as well as improving its services while growing its delivery-only kitchen business. While several other US investment companies contributed to the fundraising, Amazon remains to be the top contributor with £450m.
To date, the amount of capital invested in this UK based company since its inception in 2013 adds up to $1.5. The firm is said to be one of the fastest-growing tech companies in the United Kingdom. The company’s founder and chief executive Will Shu, said he would continue working closely with such companies like Amazon as they are a customer-obsessed firm.
Evidently, there are still ongoing worries about the impact of Brexit on the UK’s tech pool. The main factor of which, being whether EU nationals will be able to continue to work in the UK in the case of a ‘no-deal’ Brexit.
Russ Shaw, the founder of Tech London Advocates, a campaign group that promotes the London technology industry, expresses that it’s their biggest concern at the moment.
“One in five tech workers in London is from the EU. We’re growing these businesses, and the money is flowing in, but we don’t have enough talent in the country.
“We need a transition plan for companies who need to know what to do about staffing after 31 October. Otherwise, it undermines our credibility.”
Mr. Shaw states that one way the country could alleviate the risk is to ensure that immigration processes are more accessible and welcoming for overseas workers in the future.
While this would provide a fitting solution in the event of a no-deal Brexit, there’s still a long way to go before anything is guaranteed, even with the deadline looming.