Investment from European funds into the UK’s thriving tech ecosystem reached a record high of £1.89bn in 2018 (up from just £1.66bn in 2017), according to a new report published today by law firm Penningtons Manches.
The new report from Penningtons Manches, Golden Triangle: Golden Opportunities?, finds that while deal numbers involving European funds have remained the same (150 in 2018, up from 149 in 2017) the value of these deals has increased by 14%.
Investment from EU countries has notably increased, with the total amount invested, from deals with at least one EU-based investor, standing at £1.53bn in 2018, up from £1.26bn the year before. This is strong evidence that the EU remains confident in the long-term prospects of the UK’s tech sector despite the uncertainties created in the market place by Brexit.
The number of first-time deals between European funds and UK tech companies has also increased almost 80% of deals (76%) involved completely new relationships, up from 75% and 73% in 2017 and 2016 respectively.
European investor enthusiasm for backing high growth, innovative tech companies in the UK is just one part of a positive international story of growing appetite from overseas investors to deploy funds in the UK. High growth, tech businesses surpassed 2017’s record-breaking number of deals involving overseas funds last year, rising from 361 to 373 deals worth a total £4.24bn.
Deals into high-growth tech companies in the UK’s Golden Triangle – London, Oxford and Cambridge – made up 70% of all overseas-backed deals, securing a new record of 161 deals in 2018. Of these, 135 were US-backed deals, with investors attracted to the knowledge-intensive activities of the universities in these cities, as well as London’s particular draw as a fintech hub.
Rob Hayes, Head of Tech at Penningtons Manches, commented: “When it comes to the creation of cutting-edge technology, the UK is well and truly established on the world map. It is no coincidence that in 2018, the country’s high- growth, innovative, tech-focused companies – particularly those in the Golden Triangle – continued to attract attention from international investors.
“Our research has shown that, despite the impact of Brexit, the UK and its leading technology companies continue to be an attractive proposition for overseas investors seeking to deploy their funds into businesses with innovative and ground breaking technology. As we know, it is hard to predict the future given the current landscape , but we must ensure that all of the components that make the UK an attractive investment opportunity remain in place: accessibility to maintain and attract talent, robust legal and regulatory systems, a competitive tax regime and general transparency and openness to inward investment.”
The US remains the largest overseas investor in UK companies. A third (34%) of the aggregate deal value secured by UK companies came from deals backed by US funds – suggesting they are more likely to be involved in large deals.
While the West Coast leads the way when it comes to investment into UK companies (101 in 2018 – the same as in 2017), East Coast investors are catching up with 79 deals, three more than in 2017. In terms of deal value, the gap between West Coast and East Coast investments was far closer than in previous years – the total value of deals backed by East Coast funds in 2018 was £1.58bn, while deals involving West Coast funds totaled £1.67bn.
Software companies received the lion’s share of deals involving foreign investors, netting 222 of the 343 deals in 2018, followed by companies in the life sciences sector, with 32 deals. In terms of emerging sectors, fintech attracted the most amount of attention from non-UK investors – pulling in 58 deals in total – followed by artificial intelligence with 39 deals, blockchain, digital security and eHealth.