UK in 2023

Most people living in the UK have, by now, come to the realisation that it’s not a golden British era. The Gen Zers would say the UK’s in its flop era. Others might just call it a period of managed decline.

No one wants to hear about Brexit anymore, but its influence is undeniable. The political chaos of the past few years has helped Paris in its push to become a genuine tech alternative to London and Berlin. Discontent bubbles in the UK: in June, a group of almost 1,000 tech companies, including Alphabet and Apple, warned the country is falling behind in sectors like AI and semiconductors.

The UK has its problems — but you can probably overstate the decline too. Home to 43k startups, 3,500 investors and a place where over $150bn has been raised in the past eight years, the UK remains Europe’s tech leader by some margin. France appears to be closing the gap in some respects, though the UK has still managed two times the investment volume in 2023 of its neighbour across the Channel. Not bad for an off year.

But, yes, things have certainly slowed. In 2021, UK startup funding soared to €39.3bn, a remarkable 2.6-fold increase on 2020. This was met with a steep 25% decline in 2022 and a further 50% drop in 2023 year-to-date — comparable to the tech slowdown in France, but much higher than Germany’s 37% fall this year. The UK has hosted 19 $100m+ “megarounds” so far in 2023, far fewer than the 63 recorded last year. 2023 has also been dull for the $1bn+ club, with only two unicorns created — Synthesia and Quantexa, both AI startups — a sharp decline from 12 in 2022 and 16 in 2021.

There are a few chief grumbles. The tax burden is the highest since the Second World War. Industry figures say the government did the country a disservice in March by cutting R&D tax credits for most small tech companies. Olio, an app-based platform that tackles food waste, is one of the startups that will cease to qualify for tax benefits. Olio’s CEO Tessa Clarke told the FT that it’ll mean an annual loss of £250k for her company. Some feel that the UK is on the way down, while France is rising, with Paris poaching some fintech business from London and also hosting the marmalade-dropping raises of the year (for startups Mistral AI and Poolside AI).

A high point of the year for UK tech? The country rejoined the EU’s €95bn Horizon Europe research scheme, which awards lavish science and startup grants that will surely stoke new research hotspots around the country. In the battle of biggest deals, London’s battery storage and charging point operator Zenobe Energy takes the top spot, with a whopper £870m round in September, led by investors KKR and Infracapital. Energy startups scored the most funding overall this year, trumping fintech, which has been pushed down to fourth most-funded sector.

VC fund launches are ticking along nicely, with $88bn overall announced in the UK so far in 2023. This sum is lower than amounts seen in 2021 and 2022 — with new funds totting up to $125bn in both years — but there’s enough going on to conclude that, despite some problems, the UK tech scene remains a vibrant place.