The tech sector is booming... but will the bubble burst?
The New European
Last year was a record one for the UK's tech firms. But there may be trouble ahead. By ANGELA JAMESON
Two years ago there was no sector more vocal in its opposition to Brexit than the UK's tech community.
In the run-up to the referendum the industry's leading lights argued that leaving the EU would be disastrous for this high-growth sector.
It was easy to see why: the tech sector, particularly in London, relies heavily on overseas-born talent. Some of the founders of the UK's most promising tech companies – José Neves at Farfetch, Taavet Hinrikus at TransferWise – came from other countries to start their businesses here.
So has the tech sector been left adrift by the British voters' decision to abandon the EU?
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On the face of it, no.
The digital tech sector had an amazing year in 2017. On a global scale, investment into the sector in the UK was behind only the US and China.
British digital tech companies raised £4.5bn in venture capital investment during the year, according to Pitchbook figures, almost double the previous year and far ahead of European rivals, France and Germany.
Matchesfashion.com was sold to a private equity investor for almost £750m and Leeds-based CallCredit acquired by TransUnion for £1 billion. Improbable, whose technology is being used in video games, raised £370m from Japan's Softbank while food delivery service Deliveroo raised £284m and looks set to float soon.
Just last week a US investor, Silver Lake, said it was buying Zoopla, the property portal, for £2.2bn.
But there are some signs that the voracious growth of this sector is slowing. Emmanuel Macron and Justin Trudeau have both been trying to woo tech talent and Silicon Valley bigwigs, to build up their tech sectors.
The annual FT1000 list of Europe's fastest-growing companies, released last week, shows that since last year the UK's position has slipped from joint top (with Germany) to third. Both Germany and France have strengthened their position on the list, at the UK's expense.
London, however, retains the corporate crown, being home to more fast-growth companies (74) than any other European city. Paris has 62.
Does this signal that the UK's high-growth companies have gone off the boil? It's probably too early to tell since the figures are based on one accounting period only.
But Tech Nation has hit back with data which showing the UK remains a global tech hub, despite Brexit. Tech Nation 2018 reveals that UK tech companies have more foreign customers than even Silicon Valley companies. And when it comes to significant connections London's entrepreneurs have international contacts books. A quarter of the world's entrepreneurs say that they have a significant relationship with two or more people in London.
These figures, along with the level of funding going into the sector, demonstrate how internationally connected the UK's tech sector is, which is crucial in an industry which sometimes struggles to recognise borders at all. It's also important for the future health of the sector, as we look to trade increasingly across the world.
Gerard Grech, chief executive of Tech Nation said: 'London is the world's second most connected hub after Silicon Valley. We need to make the most of that, as our new relationship with the EU will undoubtedly force us to be even more adaptive, innovative and ambitious.'
Asked whether they were concerned about Brexit and whether it would hamper their ability to build their businesses, most entrepreneurs said it would not hold them back.
Resilience is in the DNA of startups – it has to be.
So it's no surprise that Brexit now looks surmountable to most of them.
Yet the real challenge is yet to come, where are these fast-growing businesses going to hire up to a third of their staff from in future? Anyone with bright ideas should probably give early warning to the Home Office.
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