UK tech sector investment strength overshadows European rivals

UK technology businesses continued to overshadow their European counterparts this year when it came to value and investment levels, although both have fallen in the face of economic headwinds as the pandemic-fuelled boom has ground to a halt.

In total, UK tech companies marked a drop in investment from $36 billion in 2021 to $27.9 billion in 2022 — about three times the level of the second-largest recipient, Germany, on $10.8 billion. London remained the most attractive European hub for capital, with $19.2 billion of financing, followed by Paris with $9.9 billion.

Last year there was a surge of investment in Europe’s tech industry, with a record $100 billion deployed, a number that is expected to fall to $85 billion in 2022 as confidence in the sector cools. Despite the downturn, this is more than double the amount raised in 2020 of $38.8 billion, which the analysis said showed how far the European tech ecosystem had developed.

The annual state of European tech report compiled by Atomico, the venture capital firm, laid bare the impact of the downturn on the sector as valuations have tumbled and job cuts have increased. The research has looked at the health of the ecosystem of both public and private technology businesses in the region since 2015.

It described 2022 as a “year of two halves” because at the start of the year there were soaring levels of investment in technology companies, a continuation of the pandemic-fuelled “frenzy” of 2021, but from July this started to die away as backers became more wary. Investors have record pools of capital; it is just being distributed more cautiously — $84 billion was available at the end of 2021, the last period for which data was provided.

Overall, the market value of European technology companies, including the UK, fell by $400 billion in 2022, from $3.1 trillion to $2.7 trillion.

The UK and Ireland are still home to the highest number of unicorns, with 118 firms valued at more than $1 billion each, followed by Germany, Austria and Switzerland, which collectively have 77 between them.

The number of people who lost their jobs “increased rapidly” last month. Overall this year, 14,000 tech staff in Europe were laid off, 7 per cent of the global total.

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UK tech sector investment strength overshadows European rivals