The past few years has seen relatively strong foreign direct investment into UK tech start-ups, with 2017 amassing a record £6bn investment.
2018 however was less successful. Research carried out by Penningtons Manches highlight that investment was down 29% from the previous year, with most experts again pointing the finger at the uncertainty caused by Brexit.
The total was down £1.8bn from 2017 but is importantly still a sizeable sum. The total of £4.2bn is still £2bn greater than that of 2016, which raises the question, was 2017 an abnormally strong year for investment in tech start-ups?
Major funding for 2018 included £180m raised by fintech firm Revolut and £158m raised by chipmaker Graphcore.
Where have we lost investment?
Chinese and US investors were those with the biggest impact on this fall. Chinese direct investment was down £700m from 2017 to £1.3bn, and US investment was down from £3.3bn to £2.5bn.
Interestingly, American companies were actually more active in the UK, a further five deals were made in 2018, albeit for less money. US investment also doubled that of internal investment made by UK investors in 2016, this being only £1.3bn. Foreign direct investment appears to still be attractive then with the continued reduced value of Sterling against the US Dollar.
A case for optimism
European investment was up to a record £1.9bn, this is up 200m from 2017. French and German companies were the most active in Europe, with Spanish, Dutch and Swiss funds also accounting for a number of investments.
European investment is unlikely to fall anytime soon, either. The UK has been cited as an ‘obvious destination’ because of the proximity and familiarity of the UK. European investors have intimate knowledge of the market and look set to continue to invest in UK start-ups.
Tech start-ups have expressed frustration, in the companies are looking to grow but are faced with a relative scarcity of talent. Many of the skilled programmers are headed to Silicon Valley tech firms where salaries are significantly higher.
Alternative investments such as hotel room investments and student property investments have continued to see year on year growth through to 2019.
Investment in Europe is comparatively stronger. Investment in France and Germany has remained strong, with growth of 27% and 26% respectively.
Although neither country can compete with the totals the UK currently boast, if growth continues it will not be long before they do. The total investment between France, Germany and the UK totals 70% of investment in Europe.
Investment in Irish tech start-ups is down 6% from 2017, whilst Sweden saw a 13% fall in the sector. As a whole, investment in Europe was up, and looks set to continue this trend going forward.
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