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The UK's Innovation Outlook: Optimism for the tech ecosystem in 2024

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2024 could be the year of recovery after UK venture capital turned a corner in the second half of last year, according to a recent report from HSBC Innovation Banking and Dealroom.

After a sharp global pullback from the second half of 2022, venture capital (VC) is now back above pre-pandemic levels in the UK and is distinctly growing again as of the second half of 2023. Amongst other factors, the positive outlook for 2024 is driven by this steady rise in VC investment, varied startup sectors, consistent unicorn creation and the diverse geographical spread of entrepreneurship in the UK.

Key takeaways

VC investment growing: The report shows consistent growth in VC investment within UK start-ups, showcasing a remarkable rise of 46% in the latter half of 2023. In that year alone, UK start-ups raised an impressive $21.3 billion – the third-highest total for VC ever recorded.

Leading startup sectors: Artificial Intelligence (AI) and Climate Tech have surfaced as the champions of the UK's startup sectors. Nearly a third of all UK VC investment in 2023 was claimed by Climate Tech, with a record peak of $6.2 billion, while start-ups focusing on AI secured $4.5 billion.

A strong position across the UK: It’s clear that entrepreneurship is distributed throughout the country with the West Midlands, Glasgow, and Northern Ireland experiencing the most substantial investment growth. These figures underscore the UK's diverse and flourishing startup ecosystem.

UK still a leading tech ecosystem: Maintaining its position as the third-largest tech ecosystem globally and the premier tech ecosystem in Europe, UK start-ups managed to secure more VC funds than France and Germany combined in 2023.

Unicorn creation: The UK expanded its roster of unicorn companies, raising the tally to 168, with 63 yet to make their exit via public markets or M&A. These unicorns have a combined value of $180 billion, offering strong prospects for future exits and returns.

Investor environment: The UK is the centre of the European venture market, home to 40% of the continentʼs venture capital, and London is the European base of choice for top international funds.

“This data demonstrates a significant positive trajectory for the UK's innovation economy, despite what has been a challenging period globally. We should be proud of the resilience the UK innovation ecosystem has shown and should celebrate its commitment to solving some of our most intractable problems,” says Erin Platts, CEO of HSBC Innovation Banking UK.

We are hugely optimistic and excited about the ecosystem in 2024 and look forward to playing our part in fuelling this critical part of the UK’s economy.

Erin Platts | CEO, HSBC Innovation Banking UK