The bygone days of mining and farming are a fading memory in the rearview mirror of your self-driving Tesla. In 2023, our planet’s burgeoning industry is tech. Capitalising on man’s ingenuity and the runaway success of breakthroughs like the smartphone, the global technology space has grown to a whopping value of $5.3 trillion.
But did you know that our humble nation boasts the third-largest tech sector in the world? Blazing the trail for Europe, the UK is the base for innumerable cutting-edge tech ventures. Each sub-sector is prospering: AI is adding billions to the economy, the number of fintech firms is set to double by 2030 and we’re even “second to only the US in the number of SaaS companies”, according to software management platform Vertice.
So, how did we get to where we are today? Let’s take a look at three of the factors that make the UK the tech powerhouse it is.
- Venture capital investment
The UK benefits from vast venture capital investment. In the last decade, investments have increased tenfold across the sector, raising a collective €13.6 billion during 2020, according to Yahoo Finance.
One of the driving forces behind this funding is the rapidly increasing number of startup and scaleup companies expanding out of UK tech hubs. With the capital ranked as the second-best tech startup hub in the world, London’s entrepreneurs have proliferated and established fintech, healthtech and edtech firms across the city.
Areas such as the Silicon Roundabout, Canary Wharf, King’s Cross, and the Olympic Park are now home to an expansive network of firms drawing international investment in the billions.
And this is with good reason: high-value, high-growth ‘unicorns’ valued at over $1 billion are entering the market each year. In 2022, the UK was home to 131 tech unicorns, as well as a further 228 in waiting.
- Government policy
The UK’s hospitable tax environment is one factor that is helping tech startups to grow fast and achieve unicorn status, as well as encouraging expanding enterprises to base their operations in the UK. As a result, the UK attracts high volumes of capital through investments and the building of tech businesses, in comparison to many competitor European markets.
This approach is part of a concerted effort from the UK government to reduce the administrative burden on businesses — and it’s served as great PR for the domestic startup ecosystem, with the World Bank ranking the UK among the top nations in the Ease of Doing Business Index.
But the government hasn’t stopped there. Recent initiatives such as the Digital Growth Grant promise funding for programmes to support up-and-coming tech businesses, providing support that includes:
- Early funding services for the digital sector
- Growth in regional support networks to attract local investment
- Digital entrepreneurship training
- Assistance in accessing existing schemes for finance, talent and market support
- World-leading education
The UK’s higher education system is renowned for its prestigious universities, placing an emphasis on research and innovation across rapidly evolving tech disciplines. And through investment in its education system, the UK has cultivated a highly technologically literate population, performing consistently well in skill rankings such as the Digital Skills Gap Index.
Capitalising on this success, initiatives in the UK have worked to foster the links between higher education research and the UK tech sector. For example, the ‘Knowledge Transfer Partnerships’ programme and ‘Getting Smarter’ strategy “have sought to extract greater value from public IP and intangible assets and foster links between research and business”, writes Institut Montaigne. Through these schemes, the UK’s educational system has helped to provide routes for knowledge sharing and industry access to up-and-coming minds in tech.
Ultimately, the UK’s educational prowess has provided a highly skilled talent pool to power tech services and startups across the country. In tandem, each of these factors has built the UK into the thriving tech powerhouse that we see today. Going forward, time will tell whether it can keep this momentum against innovating tech scenes in Switzerland, China and the US, as competitions like the AI arms race continue to heat up.