UK Tech Firms Secure Record Amount of Foreign Investment
The UK’s technology sector has always been recognised as one of the strongest in the world. Buoyed by sub-sectors such as fintech (financial technology) and the success of ‘scaleups’ – enterprises that are in the post-startup stage – the UK is a global hub for technology and continues to have a positive effect on the sectors around it.
During the entirety of 2018, venture capital investment into the UK topped £6 billion – the most of any European country. Similarly, the UK employs 5% of all high-growth tech workers in the world, putting it ahead of Japan, France and India. Finally, the UK leads the world in terms of fintech – with £4.5 billion invested in fintech firms between 2015 and 2018.
With this in mind, it should come as no surprise that the UK has secured record amounts of foreign investment this year already. With a total of £5.5 billion channeled into the sector between January and July, the Department of Digital, Culture, Media and Sport (DCMS) has revealed that the UK has not only beaten its previous month but also overtook the US for the amount of investment per capita in just seven months.
According to TechNation, £3.1 billion of this funding was provided by American and Asian investors and made up 55% of the wider total, funneled into ‘unicorns’ – private companies valued over a £1 billion – such as a Deliveroo and Ovo Energy.
Eileen Burbidge, chair of Tech Nation, said: “Investment in the UK tech sector has been steadily rising for years and as these latest figures demonstrate, the momentum is increasing. It is incredibly gratifying to see that in addition to domestic and European investors, British tech innovators are also attracting US and Asian investor attention and allocation.”
The UK has a long-standing reputation for innovation and stats show that it’s a key destination for starting and growing a digital business. At the same time, many UK companies are securing Asian funding to help encourage growth. According to the founder of Singapore-based venture capital fund elev8, Aditya Mathur, “I’ve seen a lot more requests from UK startups tapping Asian markets in comparison to a year ago.”
“They typically want access to the Asian market that is large and diverse, and for that they need an Asian investor to help them understand these markets, and also provide the kind of financing they’re looking for.”
It’s this back and forth relationship that is helping to reinforce links between the UK and Asia, particularly in terms of investment.
Foreign Investment on the Rise
This isn’t just happening in the tech sector either. Hong Kong was the top investor in London property last year at a value of around £2.5 billion. This year, the situation has been similar except central London has been overtaken by the Commuter Belt, where continued regeneration and affordability has created opportunities for much higher potential returns.
UK property continues to provide stability despite political uncertainty and it’s attracting international attention. For Hong Kong investors in particular, a two-year high for the Hong Kong Dollar (HKD) and continued domestic uncertainty means immense value can be found in a UK market that is relatively affordable.
According to the SevenCapital Brexit Survey, 95% of respondents from Hong Kong don’t consider Brexit a critical factor in their decision to invest. As undersupply continues to impact the sector, expect this to continue being the sentiment with savvy international investors that want to take advantage of effective ‘discounts’.
For property investors in particular, Brexit seems like less of an issue and more of an opportunity for plays on the foreign exchange rate. One of the major reasons for this? The state of their own property market. Hong Kong, for example, has had one of the least affordable property markets for the past nine years and is still being challenged by a problematic shortage of housing. Singapore is still struggling with additional stamp duties and rent control continues to impact in Germany. Property prices have risen by 200% since 2009 in Hong Kong and many residents have been pushed to invest overseas instead of locally.
This is why the UK property market is so attractive. Despite a similar issue of undersupply, the sector remains affordable overseas. Demand continues to grow and Hong Kong investors can find value in a market that has historically recovered well and continued to deliver consistent returns. As we head into 2020, it’ll be important for Hong Kong investors to watch the UK market closely – already we’re seeing London begin to recover while regional cities such as Birmingham continue their meteoric rise.