How does the UK EdTech sector compare to the rest of the world?

Over the past few years, technology has disrupted every sector with an array of innovative products and solutions – and the EdTech industry is no different. With technology advancing at incredible speed, Business Leader has investigated the current state of the industry, where the UK stands when compared to the rest of the world, and what the future holds for EdTech.

According to the Government, the UK has the largest EdTech sector in Europe, with ‘unrivalled expertise’ in many areas such as artificial intelligence (AI), augmented/virtual/mixed reality, and online education – and as a result, it has become a global hotspot for the industry.

Last year, the number of EdTech firms surpassed 1,000 for the first time, and over the past five years, UK schools have spent more than £1bn on digital learning tools.

A large part of that change over the last 18 months was due to the fact that the pandemic has driven change across the business world. 2020 was, after all, the year in which millions of children were forced to leave their classrooms and start learning online – and UK EdTech was there to support them.

With an ever-growing market, and relentless innovation set to continue, what is next for UK EdTech?

How big is the EdTech sector?

Data released by the Digital Economy Council last year showed that the nation’s EdTech industry is one of the fastest-growing in Europe, on target to be worth over £3.4bn by the end of the year.

However, it pales in comparison to the global size of the sector – showing both the enormous growth around the world and potential that UK tech has to expand into.

The global EdTech sector is estimated to be worth $270bn, and the entire education sector is valued at around £10tn.

Holon IQ’s extensive analysis suggests that global EdTech expenditure will reach $404bn by 2025. Even with this rapid growth, Holon IQ predicts that EdTech expenditure will still only make up 5.5% of total global education spend, showing just how much potential there is to innovate in this space.

Chris Hill, CEO of Northcoders Group, comments: “EdTech is huge. It is everywhere, from companies that deliver e-learning platforms or software for education management to training companies that specialise in technology and digital transformation. With life-long learning and career pivots becoming a global priority, EdTech is only growing. Like every industry, the education and training sector sees many disrupters and challenger companies entering the space to innovate and improve, which ultimately impacts the way education & training is delivered and creates new trends.”

Other than the pandemic, there have been a few other factors that have driven this disruptive force.

Hannah Parvaz, Head of Marketing at Uptime, said: “This popularity is partly down to the decrease in the cost of developing technology, which has enabled new products and services to spring up, from apps to learning platforms, to new devices and gadgets. But at the core of this sector is the focus on education and learning. Humans are inquisitive creatures; we want to be constantly engaged and developing and learning as we go. Technology is key to making learning more accessible.”

With an increase in popularity, and a surge in investment, what is next for EdTech?

Martin Hassler Hallstedt, PhD, CEO and Co-founder of Akribian comments: “EdTech has become popular in recent years due to an increased awareness of learning and education, being a key driver in economic growth, coupled with rising usage of technology. Whilst we have seen growth, the education sector is still under-digitised, with less than 4% of global expenditure on tech. Digital spend is growing fast and is forecast to grow exponentially, presenting a huge opportunity for EdTech start-ups like ourselves.”

Investment hotspot?

With an ever-evolving industry that is constantly being disrupted by innovative new products and services, it is no surprise that investors and entrepreneurs want to be involved in this dynamic sector.

From a global perspective, EdTech investment reached $13bn in 2020, an increase from $5bn in 2019, according to Tech Nation. The largest deal was from Chinese company Zuoyebang, which raised $1.6bn last year. Large investments like this one have helped create 26 EdTech unicorns in the past five years.

According to the Tech Nation report, 2019 was a record year for EdTech investment in the UK, with $184m raised. However, there was a decrease in 2020 to $124m going against international trends. Despite the overall fall in investment, several companies received significant investment.

As observed in other UK industries, where there was a fall in total investment, there was nonetheless an increase in median investment per deal and a 34% increase in median post-money valuations. These investments highlight that follow-on investment rounds were still happening to the benefit of already established companies.

When looking at the rest of the world, Chinese companies had the largest share of VC investment in EdTech with $8.9bn in 2020, followed by the United States with $2.3bn. The UK has the highest investment level in Europe, followed by Germany with $60m, the Netherlands with $35m and France with $25m.

A recent report by Robert Walters found that the UK attracts almost half of all EdTech investment coming into Europe, highlighting its importance in the region.

With the government focusing on growing the industry in the years ahead, 2021 has seen a recovery in investment. This is down to one main factor.

Marnix Broer, CEO and Co-founder, StuDocu, explains: “Before COVID-19, there were already a strong number of start-ups exploring innovation within the education sector. The pandemic, of course, then prompted a massive acceleration in adoption of these existing services. This created a chain reaction and investors suddenly felt like they were missing out; something that suddenly saw EdTech as one of the hottest industries to invest in.”

Impact of COVID-19

Speaking of the pandemic – it is clear that it was the accelerant for the uptake in EdTech across the UK and beyond.

Parvaz comments: “The EdTech industry is much larger now as more investment has flowed into it and demand has shot up. Europe has three EdTech unicorns, and two of them were made this year, demonstrating how much interest there is now.

“Covid-19 has certainly had an impact. Remote work means companies are relying on corporate learning platforms to upskill and train staff and schools are investing in platforms and services that enable remote learning. The explosion in technology also means that people need to constantly be learning to keep up with innovation and remain relevant in a changing world.”

Like almost every sector over the last few decades, technology has created rapid and irreversible change. However, some industries have welcomed and adopted it sooner than others.

Kirill Bigai, Co-founder and CEO of Preply, explains: “The truth is, the education sector has been ripe for disruption for quite some time, and there are several factors that pushed it towards innovation: the Covid-19 pandemic, a new generation of mobile-savvy students, and higher consumer expectations in terms of personalised learning.

“When the EdTech sector was first developed, it felt a bit more niche. Today, it’s a much broader marketplace that is completely modernising education as we know it. There is no doubt that the pandemic has accelerated the demand for, and innovation of, digital education tools.”

Due to its late uptake in the latest innovation, EdTech is still coming to terms with how best to use its modern tools.

Simon Nelson, CEO of QA’s Higher Education business, comments: “Covid-19 moved the whole industry forward at least five years, by forcing rapid adoption of EdTech solutions around the world.

“But, before the impact of Covid-19 was felt, the industry had already reached a significant stage in its evolution. The large quantity of EdTech start-ups that emerged and grew through the 2010s have started to mature. At the same time, the funding has begun to flow through the UK and European EdTech sectors in a way that was previously only seen in the US and Asian markets, largely due to the scale of opportunity and the maturity of the tech funding space in those locations. Finally, we are starting to see consolidation in what was a very fragmented market.”

Impact on schools

It is estimated that UK schools have a collective annual IT budget of around £900m. With EdTech barely scratching the surface in many areas of the country, change is on the horizon for the education sector. So, what shifts in schools will we see?

EdTech has created new trends in the education of students of all ages, and now is the time to prepare them for a fully-digitised world and adapt to the latest trends.

William Britton, Founder and CEO of AutonoMe, comments: “What we’ve witnessed recently is that Covid-19 has accelerated the adoption of new models of learning, in particular a blended learning model that combines face-to-face teaching with online learning embedded into the curriculum.

“Education providers are keen to utilise the new technologies they have been exploring throughout the pandemic in a more settled environment. Blended learning is now seen as an opportunity and this increasing openness to technology is creating opportunities for companies like ours.  Educational institutions have recognised that technology-enabled, remotely-delivered learning and wider support will become increasingly mainstream and, thus, an expectation from students.”

Much like the wider business community, the education sector has had to fully embrace digital transformation.

Diego Fanara, CEO and Co-Founder at Unibuddy, explains: “When universities had to switch to online teaching and learning in March 2020, EdTech finally got the starring role in education that digital education specialists had for years cajoled their more traditional colleagues to give it. Teaching staff and students adapted and embraced EdTech in order to weather a global emergency.

“The higher ed sector was not nearly prepared for the effects of a global pandemic. Like the rest of the world, higher ed had to pivot, change, shift and navigate through the uncertainty that came with COVID-19. Not only did it have to cater to the urgent needs of its current students, but the needs of its staff, as well as its prospective students. A digital approach was urgent, necessary, and initially challenging. However, once executed successfully, it was an eye-opener and, perhaps, an involuntary but much-needed shake-up.

“Once the challenges were overcome and the sector adapted to a digital-first approach, it became clear that the changes were welcome. And despite the negative criticism initially endured, it was evident that higher education had seen a positive shift in its traditional methods of educating and recruiting.”

But what are the big developments set to take place in the UK education sector?

Hallstedt said: “The industry is constantly evolving with much innovation. Learning researchers and academics are now coming into the field, combining science and top research with leading tech expertise, which is bringing new, innovative products. Artificial intelligence, which is still is its infancy for education, is one of the biggest developments we can expect to see over the coming years. In 10-15 years from now, we will have reached personalised learning using AI. A massive game changer for the industry – how we learn, teach, and behave.

“As the consumer advances their technology expectation and the industry innovates, we will see more game embedded teaching platforms rather than adding gamification onto traditional maths tasks. Games motivate and motivation is a key factor for learning.

“By 2030, half the world’s youth will live in countries with mobile-first or mobile-online internet connections, so we can expect to see EdTech spreading more widely and being used by schools and children world-wide.”

When looking at higher education and the impact on the business community, there are other trends to be aware of. Nelson comments: “There is a move towards a more modularised approach to learning, for example, unbundling the components of a traditional qualification, such as an undergraduate degree, into micro credentials. This more flexible approach to learning allows students to acquire the knowledge and skills required to make them attractive to employers, while also accommodating work and personal commitments. Learners completing all the component parts are still able to achieve an undergraduate or postgraduate degree.”

Helping the vulnerable

It is not just the next generation of the workforce that have benefitted from the EdTech revolution – but it is also helping to level the educational playing field for those suffering from learning difficulties.

Britton explains: “It has long been recognised our educational system struggles to cater as effectively as it could to children and young people with additional needs. Resources are limited and specialist training for teachers in how to effectively support neurodiverse learners and those with disabilities is
not widespread.

“Technology can help with this – it’s a powerful educational enabler for people with learning disabilities and difficulties – building confidence and raising the aspirations of learners, parents and educational professionals is of crucial importance.”

What’s next?

Despite the sector’s initial trepidation in embracing the influence of technology, EdTech is set to go from strength-to-strength in the UK.

Parvaz concludes: “Trends such as remote work, high demand for upskilling, micro-learning and on-demand platforms that can be adapted to suit a learner’s changing schedule are set to dominate the industry for the next few years. We’ll likely see more unicorn companies coming out as more investment comes into the space. It’s an exciting time to be in EdTech for sure.”

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