UK tops Europe for venture investment despite ‘Brexit’

Bloomberg

The UK 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 on 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 UK 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 UK 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.

BREXIT RISKS
Still, the report highlighted the risks for the UK 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 UK,” said Simon Calver, a partner at London-based BGF Ventures.
The report highlighted the importance of the UK’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.

PRODUCTIVITY BOOST
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 US, France and Germany for decades, with the gap yawning significantly ever since the 2008 financial crisis.