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UK can only remain a leader in tech innovation if British start-ups excel at scale

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From December 2018 to February 2019, high-growth firms in London grew by over 56pc, faster than anywhere else in the world

As the UK expands its reach on the global stage, one of the sectors that we can confidently predict will help propel us forward is our world-leading tech sector. Across the UK, British tech startups and scaleups are pioneering ideas and businesses that will shape how we live, work and play for decades to come.

Our latest annual report, Tech Nation 2019 with data from Companies House, GitHub, StreetBees, DealRoom and PitchBook and in association with the World Economic Forum, shows that the UK is punching well above its weight internationally.

The findings are compelling. To date, an impressive 35pc of European tech businesses valued at $1bn or over (known as unicorns) were created here in the UK. And Britain now has six cities which have produced at least two unicorns each, including Cambridge (DarkTrace and Arm) and Manchester (The Hut Group and boohoo).

But the most exciting finding by far in our 2019 report is that Britain is stepping up to the scaleup challenge.    UK tech has long been at the forefront of innovative startups. We’re brilliant at conceiving and building game-changing businesses. We lead Europe for investment in new tech businesses, with over £6bn of startup investment in 2018.   

The next challenge is to excel at scale, or high growth. Scaling and growing a tech businesses is not the same as starting it up from scratch. Managing the step up from a founding team in a co-working space to an international enterprise with partners and alliances all over the world – that is something else.

It requires a bold mindset prepared to think not just locally and linearly, but globally and exponentially.    Our report shows that the shift is already happening. The UK now ranks 4th in the world for attracting scaleup investment, after the US, China and India. And scaleup tech investment is 2.5 times higher than might be expected based on the relative size of the UK economy in 2018.   

From December 2018 to February 2019, high-growth firms in London grew by over 56pc, faster than anywhere else in the world. And between 2017 and 2018, investment in high-growth digital tech firms shot up by 61pc – driven in large part by ambitious UK tech scaleups.   

The growth in scaleup investment is especially striking in fintech, where the UK ranks number one in the world (generating £4.5bn in funding between 2015 and 2018). Ambitious bank and investment scaleups such as OakNorth, Monzo, Starling and Revolut are already becoming household names and crossing borders.   

Scaling-up is good news for jobs. The UK is a hotbed for tech talent, employing 5pc of the world’s high-growth tech workers, ahead of Japan, France and Sweden. Investment data shows that AI and Big Data are increasingly prevalent in the scaleup story. That means more jobs generated in these sectors. 

While London is naturally a hub for global investment and talent, scaleup success across Britain is crucial as we compete globally.  For the first time, the team at Tech Nation, examined data from scaleup investment in cities across the world over a specific period of time.  

For example, for a period of time in 2018 and early 2019, Oxford attracted the same amount of scaleup investment as Paris. Similar investment patterns were found between Reading and Philadelphia, while Manchester attracted comparable levels of scaleup investment as Budapest. Indeed, Manchester has become an e-commerce hub of expertise, with 5 e-tail unicorns. 

Data like this helps us view opportunities globally. It takes us outside our local area and forces us to think exponentially. This new generation of digital tech innovation is driven by a borderless mentality, embracing digital ecosystems around the world, sharing of knowledge and networks. 

In the highly networked world, a business can scale simply by plugging into a matching ecosystem. Find the person with the right skills and languages, conversant in the relevant regulatory framework, and you can start growing your business in countries you may never have visited.

It’s time to raise our game even further, building not only national networks, but also international ecosystems around the world. International clusters could allow us to fire up opportunities anywhere from Austin to Singapore. A constant pool of tech talent, both international and home-grown, continues to be a top priority. As Tech Britain scales up, it’s time to keep our digital vision global and exponential.

Gerard Grech is Chief Executive of Tech Nation, the UK network for ambitious tech entrepreneurs.