Tech investment falls as Brexit headwinds strengthen

Paris and Berlin gain ground as investments in London drop amidst 'Brexit-induced uncertainty and alarm'.

Tech investment in the UK and London dropped significantly in 2018 compared to the year before, even as European rivals grew rapidly, according to new figures.

The UK, and London in particular, continues to dominate the European tech investment landscape, but that lead is being eroded as Brexit looms. The latest figures published by London & Partners and PitchBook show that London's tech companies received £1.8 billion -- 72 percent -- of the total £2.49 billion raised by British tech firms.

Britain's tech sector continued to attract more venture capital investment and tech IPOs than any other European hub in 2018, but investment in the capital and elsewhere were down significantly on 2017. Investment in London tech companies at £1.8bn is 29 percent down on 2017, when London firms raised £2.53bn. The figure for overall tech investment in the UK is also down by 20 percent from £3.12bn. Similar figures released by Tech Nation late last year told a similar story, calculating that venture capital investment had fallen to $7.9bn in 2018 from $8.1bn in 2017.

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According to the data from London & Partners, Berlin tech companies scored £936m investment in 2018 -- double the £456m total of 2017. Paris saw investment grow to £797m, up from £564m the year before.

London & Partners said 2017 was a record year for venture capital investment for the UK and London, with a number of very large deals in 2017. Taking these into consideration, funding levels in 2018 are closer to those seen in 2017, although still down.

Laura Citron, CEO of London & Partners said: "2018 was another strong year for venture capital investment into London's tech sector, demonstrated by the fact we saw almost double the amount of funding than any other European tech cities and more funding than all other years prior to 2017." 

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Despite the decline, some sectors have grown. The figures show that investment into the UK's AI companies hit £736m in 2018, a 47 percent increase on the £499m raised in 2017. The figures were boosted by a number of larger deals, including a £58.86m Series B round for London-based online travel firm Culture Trip and a £153m Series D round for AI chipmaker Graphcore. Cryptocurrency and blockchain technology firms also saw record growth in 2018, with UK firms receiving over £200m in VC funding compared with just £19.11m in 2017.

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The UK's fintech sector also continues to be a major draw for venture capital investors, with London-based companies raising the vast majority of money; £1.08 billion (over 90 percent) of the total £1.17 billion received by UK fintech firms last year.

"Today's announcement shows that investment and growth capital is still flowing into London, and across the UK, moving with grim determination against the prevailing winds of Brexit-induced uncertainty and alarm," said Ben Brabyn, head of Level39, a tech hub that hosts 200 tech startups and scaleups.

"A critical question for the next twelve months is whether the capital entering London is sufficient to allow tech companies to grow beyond early stage investment and scale both nationally and internationally. If we're going to go it alone in 2019, we must do all we can to produce world-beating businesses again and again."

Tech companies have long been concerned that the UK's decision to leave the European Union could hurt investment and jobs in the capital and elsewhere.

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