Following another record-breaking year for UK tech investment, figures from the latest Digital Economy Council (DEC) report show that not only did Oxford attract the most venture capital funding of any region outside London in 2021, but it raised more than all the other regions combined.
Using data from Dealroom and job search engine Adzuna, the new DEC Levelling Up Power Tech League reveals that between January and November, Oxford-based firms attracted £1.3 billion in funding. By comparison, all the other regions analysed – including Manchester, Liverpool, Newcastle, Birmingham, Bristol, Leeds, Cambridge, Edinburgh, Cardiff and Belfast – raised a combined total of £1.275 billion.
Oxford’s impressive figure was driven by a number of high-profile, high-value deals, including the £396m Series D raise by newly-crowned unicorn, AI drug discovery Exscientia and £127 million raised by biotech company Vaccitech which helped create the AstraZeneca Covid-19 vaccine. Oxford was also home to the joint highest number of regional VC rounds, with a total of 49 rounds taking place in Oxford in 2021, putting the region on par with Cambridge.
In addition to Exscientia, the city is now home to one other unicorn – high-growth tech company worth more than $1 billion in valuation – and six future corns which are expected to reach this valuation in the next few years. All these achievements combined to see Oxford place third in the overall ranking of UK’s leading regional tech hubs, behind Cambridge and Manchester.
Oxford lost places to these cities because there are fewer available tech jobs in the city (1,408) and the advertised average salary is on the lower end of the scale at £51,315.
Levelling Up Power Tech League 2021:
This regional growth took place against the backdrop of an incredible year for the UK tech industry. Tech investment grew 2.3x this year, the highest growth since 2013 to 2014 when it grew from $2 billion (£1.5 billion) to $4.6 billion (£3.5) billion.
The £26bn raised by UK startups and scale-ups was nearly double the figure raised in Germany (£13.5 million) and is more than three times that raised by France companies (£8.6 billion). UK tech investment made up 35% of the total £76 billion that flowed into the European tech ecosystem this year.
UK venture capital firms have also had a record year and raised £7 billion with record-breaking rounds from London firms including Index Ventures, Balderton Capital, 83North and Eight Road Ventures.
The majority of the money coming into UK tech is from the US, with more than 38 per cent of all funding coming from the States, up from 31.5 per cent last year, with the majority of it going into fintech and health tech companies. More than 28 per cent of UK venture funding came from domestic capital. Competition for deals among VC funds is heating up as more US venture funds launch offices in the UK, including General Catalyst, Lightspeed Venture Partners and Sequoia.
29 have been created this year including the e-commerce platform Depop, payments platform GoCardless, car selling platform Motorway, insurance disrupter Marshmallow, and the challenger bank Starling Bank. This takes the UK’s total unicorn figure to 116 meaning 25 per cent of the UK’s total unicorns were created in 2021 alone. The UK has more unicorns than France (31) and Germany (56) combined.
Nine out of the 29 unicorns created this year are outside of London including Interactive Investor in Glasgow, Vertical Aerospace in Bristol and Touchlight Genetics in Hampton. Of all the unicorns created in the UK, 35 per cent are outside of London.
The increased levels of money going into UK tech also mean companies are in need of trained technical and business staff. There has been a 50 per cent rise in overall UK tech job vacancies advertised this year compared to 2020’s figures, with advertised tech vacancies hitting 160,887 in November. Currently, tech vacancies make up 12 per cent of all available jobs in the UK, with just over 50 per cent of these jobs available outside of London and the South East.
Software developers are still the most in-demand tech job across the UK. These positions make up nine per cent of all tech jobs with prospective developers being offered an average salary of £64,318, a 12 per cent increase on 2020’s figures. Specialist staff such as java developers and IT systems architects continue to be able to command high salaries with the average advertised wage for these roles being £80,076 and £93,004 respectively.
The UK tech industry continues to lead the way when it comes to hiring practices since technical jobs are well positioned to be carried out remotely. In fact, 21.6 per cent of all job ads in the IT sector are advertised as remote roles. This is also contributing to the spread of the UK tech ecosystem beyond London as businesses can hire across the country and find the staff that they need, regardless of location.
The government has increased its investment in R&D this year to £20 bn by 2024-25, to support the UK’s research institutions, universities and businesses with an aim to increase this to £22 bn by 2026-27. This investment is aimed at securing the UK’s future as a global science superpower, supporting businesses as they transition to becoming more innovative and productive and creating highly skilled jobs across the country. At the same time, there has been increased private investment in deep tech firms, totalling £6.2bn in 2021, up from £2.8bn in 2020. One of the biggest deep tech deals of the year was the £396m Series D raise by AI drug discovery company Exscientia, of Oxford, which helped the company achieve unicorn status.
Digital Minister Chris Philp said: “It’s been another record-breaking year for UK tech with innovative British startups helping solve some of the world’s biggest challenges.
“Capitalising on this fantastic investment across the country is a crucial part of our mission to level up, so we are supporting businesses with pro-innovation policies and helping people to get the skills they need to thrive in this dynamic industry.”
Saul Klein, partner and co-founder at UK-based venture capital company LocalGlobe, said: “It’s taken 20 years for UK tech to get to the starting line and things start to get interesting in the next 20 years. We have all the ingredients to become the leading tech ecosystem in the world, with record levels of R&D, financing and established tech hubs across the country from New Palo Alto in Kings Cross, to Cambridge, Edinburgh and Manchester. But the key differentiator for investors in future will be a willingness to take an ethical approach to building businesses. We can be world-class in this and over the long term this will set our companies apart from those built in the US and China.”
Yoram Wijngaarde, founder and CEO at Dealroom, said: “The UK tech ecosystem has exploded in the past year, with an increasing number of mega rounds minting new unicorns and futurecorns every day. This is significant because we know from research that employees at $1b+ companies often go on to found their own startups, some of which become unicorns themselves, which helps to shore up the ecosystem and lead to a new generation of global companies.”
Andrew Hunter, co-founder at Adzuna, said: “The growth of tech companies across the UK has led to a surge in hiring across the country. The number of IT job openings is higher than its ever been and is consistently growing week on week. In particular, it’s great to see strong hiring in cities like Manchester and Birmingham which are showcasing some of the highest figures outside of London. The struggle for businesses across the country is having enough skilled staff to fill these positions to allow them to keep growing.”
Gerard Grech, founding Chief Executive, Tech Nation, the scaleup accelerator for UK tech companies, said: “With such a record tech investment year, it’s becoming increasingly evident that the UK is very good at rearing and cultivating startups and scale-ups into successful global companies right across the UK, unlike its continental European neighbors, where it tends to be more in capital cities. A true network of digital excellence is emerging right across the country through entrepreneurship, driving new job and wealth creation. Tech Nation is committed to identifying and fueling the growth of these high-potential businesses through its programs and initiatives, removing geographic and financial barriers as quickly as possible.