Brexit Hasn't Hit Venture Capitalists' Love for BritainBy
London leads Amsterdam, Paris, Berlin by wide margin
Investors increasingly look to U.K. tech hubs outside London
The U.K. drew more venture-capital investment last year than the next four European countries combined, mitigating concerns that Brexit is hurting British startups’ fundraising.
Venture-capital firms plowed 6.8 billion pounds ($8.5 billion) into Britain last year, according to an annual study released Wednesday from Tech City UK, a London-based organization that promotes the country’s digital economy. That’s about two and a half times more than invested in France, and almost five times more than in Germany.
Since its vote to leave the European Union in June, other European tech hubs have attempted to lure investment and startup talent away from Britain, which has traditionally attracted the lion’s share of funds. The new data shows these efforts have yet to gain much traction, with the U.K. able to increase its share of total European venture investment to 43 percent from 32 percent in 2015.
London received nearly 2.2 billion pounds in tech investment in 2016, almost twice that of the next-ranked city, Amsterdam, the report showed. Paris received just over 1 billion pounds while Berlin, often talked of as a rival hub to London, garnered 600 million pounds.
The U.K. was a relative bright spot in Europe, with venture funding for the region as a whole falling 32 percent to 15.8 billion pounds last year.
Still, the report highlighted the risks for the U.K. tech sector if the country cracks down on foreign workers as part of its post-Brexit policies. In London and the Southeast, almost one in three digital workers isn’t a British citizen, with more than one in 10 coming from another EU country. Nationally, 13 percent of digital workers are non-British, with 6 percent coming from the EU.
Tech City UK’s members said the supply of skilled talent was their top concern for the coming year, according to survey results included in the report.
“We need to maintain access to skilled workers while doubling down on home grown tech talent," Gerard Grech, chief executive officer of Tech City UK, said in a statement.
For the first time since 2012, the Tech City report showed more investment flowing to British tech hubs outside of London than to the capital, although London still received more money than any other city. Edinburgh, Cambridge, Bristol, Bath, Oxford, Manchester and Sheffield attracted the most money outside of London.
"There are deep reserves of talent in tech clusters in the regions of the U.K.," said Simon Calver, a partner at London-based BGF Ventures.
The report highlighted the importance of the U.K.’s tech industry to the economy. Digital businesses contributed 97 billion pounds of gross value added in 2015, the latest year for which figures were available, according to the report.
Economists -- including most recently Andy Haldane, the Bank of England’s chief economist -- fret about poor productivity growth among British businesses. Average productivity per hour worked has lagged behind the U.S., France and Germany for decades, with the gap yawning significantly ever since the 2008 financial crisis.
Expanding the footprint of the U.K.’s tech economy might help Britain overcome this deficit. The average digital worker in the U.K. was twice as productive as those in other sectors, contributing 103,000 pounds in economic value per year, the report said. And the gap has expanded 10 percent in the past five years.
The technology sector produced new jobs at twice the rate of the rest of the economy, and the positions it creates pay well. The average annual salary for tech workers is now 51,000 pounds, 44 percent higher than the national average.
The U.K. ranks third in the number of computer software developers, after the U.S. and India, according to survey results published Wednesday by Stack Overflow, a site that helps programmers answer technical questions and find jobs. In the U.K., a full-time programmer’s salary is, on average, about 40 percent smaller than in the U.S. and about 7 percent lower than in Germany, Stack Overflow found.
Stack Overlow said that of the computer programmers in the U.K., more than half live in Southern England, with 21 percent concentrated in greater London.