Overall UK tech investment fell to $27.9bn in 2022, down from the record $36bn raised last year
UK technology investment dropped 22% this year, one of the steepest falls in Europe, amid difficult economic headwinds that have forced startups to slash valuations and make mass layoffs.
Overall UK tech investment fell to $27.9bn in 2022, down from the record $36bn raised last year. Despite the notable decline in tech investment, the UK continues to be a magnet for investment and remains Europe’s best-funded country, receiving 35% of all investment over the past five years.
France has taken UK’s title as the third largest listed tech nation, with Britain moving down to fourth. The two countries combined are responsible for half of all European venture capital (VC).
Atomico’s State of European Tech 2022 report, an annual finger on the pulse of the industry, outlined a ‘year of two halves’ as investment levels across Europe faced a reckoning from rising interest rates, soaring inflation and a looming recession.
Simon Bumfrey, head, relationship banking Europe, Silicon Valley Bank UK, said: There is no doubt the economy has faced severe headwinds this year, which has led to uncertainty across every life-stage and sector of the innovation and technology ecosystem.
The slowdown in investment activity comes as no surprise, but overall, it has been encouraging to see how swiftly businesses have adapted to the challenges with such tenacity and agility, he said.
The report found that the UK is home to more startups – 39,449 – than any other country in Europe, which combined has a total of 160,000 startups.
Investors across Europe might be taking a more cautious approach, but they still have record amounts of cash to deploy: $84bn is the estimated figure at the disposal of venture and growth funds.
The median VC fund size in the UK & Ireland, Germany, Austria and Switzerland was found to be almost double of their European counterparts. However, dry powder, a measure of available capital, of VC firms in the UK & Ireland declined by 10% in 2022.
Russ Shaw CBE, founder, Tech London Advocates & Global Tech Advocates, said: Against some challenging economic headwinds, Atomico’s 2022 report proves that tech is still punching above its weight. There’s been a relative ‘cooling-off’ with megarounds and inflated valuations – but the resilience and maturity of the European tech ecosystem prevails.
The UK’s share of unicorns in Europe has dropped from 41% in the years before 2018 to only 26% in the last five years.
The creation of European tech unicorns was also down from 105 last year to only 31 in 2022. UK unicorns produced this year include payment firm Paddle and autonomous vehicle startup Wayve.