Equity investment in UK tech SMEs soared 27% to £4bn in 2019

By Robert Scammell

Equity investment in UK technology firms increased by 27% to £4bn in 2019, according to figures published today by British Business Bank.

It is the largest amount invested in private UK tech shares since the government-owned development bank began tracking equity investment in 2011.

The Small Business Equity Tracker showed that the tech sector scooped up 47% of all equity investment in UK small and medium-sized enterprises (SMEs) last year. This was made through a total of 691 deals.

Total equity investment in UK SMEs across all sectors came to £8.5bn, reflecting the large presence of technology SMEs in the country.

Software companies attracted the most equity investment, at £2bn, while the life sciences netted investment worth £540m.

Software as a service (SaaS) companies were particularly attractive among investors, with deals in that vertical generating £2.5bn in investment.

The UK’s successful fintech sector also proved a popular choice, with £1.8bn invested across 193 deals.

Most deals were made in London (52%), but the number of deals in areas outside of the capital increased compared to the previous year.

“This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business,” said Keith Morgan, CEO, British Business Bank.

Equity investment in UK tech show strong growth prior to Covid-19

The figures reflect a period of strong growth in UK tech before the coronavirus pandemic. Although market growth had been softening pre-pandemic, the fate of the UK’s private equity market is less certain in 2020 as a recession looms.

“As the economic impact of Covid-19 continues to affect businesses across the country, the work of the Bank has never been more important,” added Morgan.

“Ensuring a wide range of innovative and ambitious smaller businesses continue to have access to equity investment to support their growth plans will be essential to the UK retaining its world-leading position in science, innovation and technology.”

Alice Hu Wagner, managing director of strategy economics and business development at British Business Bank said: “The British Business Bank’s Small Business Equity Tracker report illustrates a strong interest in growth stage investment in the equity market in 2019, with a particular focus on tech businesses.

“Ensuring our high-potential later stage companies have the capital they need to compete on the global stage will be crucial to powering the economic recovery.”

Read more: UK tech startups net £10bn in venture capital investments