Weak pound attracts investors from the US and Asia to UK tech

(qlmbusinessnews.com via bbc.co.uk – – Wed, 21st Aug 2019) London, Uk – –

The UK tech sector has attracted more investment from the US and Asia in the first seven months of this year than it did during the whole of last year.

Japan and Singapore are the biggest Asian investors into UK tech, beating China,figures from the UK's Digital Economy Council and Tech Nation show.

Industry players say lower valuations in the UK due to the weaker pound are attracting investors to the sector.

The pound is currently trading at about a two-year low against the dollar.

Increasingly, UK companies are also heading to Asia to raise capital.

“I've seen a lot more requests from UK start-ups tapping Asian markets capital financing in comparison to a year ago,” said Aditya Mathur, founder and managing director of Singapore based venture capital fund elev8.vc.

“They typically want access to the Asian market that is large and diverse, and for that they need an Asian investor to help them understand these markets, and also provide the kind of financing they're looking for.”

Hedging tool

UK tech firms also provide Asian investors with a way to hedge against the trade war, analysts say.

“Foreign investment into both the US and Chinese tech sectors has gone down because of the trade war and because Europe has provided several attractive investment opportunities lately” said Yoram Wijngaarde, founder and chief executive of Dealroom, the company that pulled together the figures for the research.

“The UK provides an attractive opportunity for funds looking to grow their investments.”

Investment from the US and Asia into the UK tech sector totals $3.7bn (£3.02bn; €3.31bn) so far this year. That's in comparison to $2.9bn for the whole of last year.

In total, Asia invested $1.8bn into the UK tech sector in the first half of this year, compared to $0.6bn the year before.

Companies in the UK's fintech and financial sector are amongst those that attracted the most interest from Asia's investors.

In May, Japan's Softbank bought an $800m stake in Britain's Greensill, which provides short term loans to companies to help with their operational needs.

Softbank and the Singapore-based Clermont Group also invested $400m in UK firm OakNorth Bank, a digital-only bank providing loans for small and medium-sized companies.

And Japan's Mitsubishi Corporation spent $220m buying a 20% stake in UK power firm Ovo Energy.

Still, the US is by far the biggest investor in the UK's tech sector, figures show, with $2bn worth of investments so far this year.

Online food delivery businesses like Deliveroo and digital payment platforms are among the areas that caught the attention of American investors.

‘Investor confidence'

“Today's figures demonstrate investors' confidence in the UK tech sector,” Natalie Black, the UK Trade Commissioner to Asia Pacific said.

“By attracting a broader mix of investors, particularly from Asia, we are showing that the UK's tech sector is one of the most competitive in the world, with a stable, bright future.”

Still, worries about what impact Brexit will have on the UK's tech talent pool are worrying investors and companies, who are concerned the UK will see a brain drain if EU nationals aren't able to work in the UK in the event of a no deal Brexit.

“It's our biggest concern right now,” said Russ Shaw, founder of Tech London Advocates, a campaign group promoting London's technology sector.

“One in five tech workers in London is from the EU. We're growing these businesses, and the money is flowing in, but we don't have enough talent in the country.

“We need a transition plan for companies who need to know what to do about staffing after October 31. Otherwise it undermines our credibility.”

Mr Shaw has said one of the ways the UK could mitigate these risks is by making the immigration process for overseas workers easier and more welcoming in the future.

By Karishma Vaswani