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The announcement that UK tech firms have raised £3.2bn since the start of the year will probably make painful reading for the entrepreneurs and startups across the country struggling to survive amidst the economic turbulence of the global pandemic.
While the research from Tech Nation and Dealroom recognises that many of these deals were agreed before Covid-19 and suggests that figures for the second half of the year will fall, the celebration of record-breaking investment activity misses the reality facing a majority of tech business leaders.
The announcement heralds the continued success of UK’s tech unicorns and promotes the increase of salaries across London’s 650,000 tech workers – and this is indeed good news. However, a vast number of redundancies and pay cuts have swept across the sector, even at celebrated scaleups such as Monzo and Revolut.
The announcement also holds up the government’s Future Fund as a silver bullet to address the financial concerns of tech companies. The Future Fund is an important vehicle for funding, yet its oversubscription within hours of the portal launching is indicative of the challenges being faced by UK startups.
Analysis released by Plexal and Beauhurst in April showed that while startups have been able to raise funding during lockdown, only 3% has gone to startups raising for the first time.
For many viable, ambitious and high-potential tech startups, the ongoing support of the major venture capital (VC) firms is a comfort beyond their reach. The situation is simple – the grassroots tech community has been hit hard by Covid-19, and we need to find ways to further support them through the economic downturn and ensure they emerge even stronger.
Given the economic importance of the industry, now is the time when the private sector needs to stand shoulder to shoulder with government to have a frank and honest conversation about what is working, what is not working and what interventions will make a difference.
The government has been very effective in reaching out to the tech sector to have constructive discussions as to where it can help. As we go through an economic downturn, more of this engagement will be very welcome.
Of course, it’s not all doom and gloom. As the business community has transitioned to remote working, we’ve seen the hyper-acceleration of digital transformation strategies that have created huge opportunities for digital management, communications and video services.
At the same time, cyber security, artificial intelligence (AI), edtech and healthtech have emerged as the verticals providing answers to the questions posed by lockdown. It has also been humbling to see so many tech companies pivoting to support the NHS during the pandemic, and finding new ways of serving their local communities and networks.
The British tech sector is not just fundamental to the country’s economy, it is playing a vital role in enabling the continued operation of business and society.
For years, Tech London Advocates has been championing London as a global tech hub, and campaigning around issues such as diversity and inclusion, visa regulations and inspiring young people into the sector to ensure UK tech is sustainable from a talent perspective, as well as has access to funding.
Immediate steps need to be taken to provide tech startups with the financial support they need to survive the coming months, especially in relation to cash management. But plans need to be implemented now to consider the impact of Covid-19 on talent and people.
Think about the young people entering the jobs market amid record unemployment levels. The average salary in tech of £55,000 is out of reach for a generation scrambling for jobs in a landscape shell-shocked by the pandemic.
For a sector that doesn’t have an admirable track record on diversity and inclusion, the looming economic recession will make it even harder for women, ethnic minorities, people with disabilities and members of the LGBTQ+ community to find prominent roles as companies implement conservative financial thinking.
And the implementation of strict immigration policies under the guise of protecting against a second wave prevents the UK from being able to attract world-class talent.
Going forward, we need to focus on interventions that matter, and not get ahead of ourselves by promoting results that potentially disguises the gravity of the situation.
How much better to mark the recent London Tech Week than with a bold and ambitious vision to leverage technology to transform the employment landscape post-Covid and create fertile growth opportunities for startups and small businesses.
Let’s work together to make digital skills available to those made unemployed by the pandemic and to meet the needs of a society facing long-term social distancing and disruption to create job opportunities. Let’s make sure the economic packages introduced by the government meet immediate demands and don’t get bogged down by inefficient distribution models.
The CBILS scheme had many issues to address in terms of getting loans approved. The British Business Bank is determined to make Future Fund monies available within a few weeks of applying.
Let’s create an environment that supports diverse talent and encourages inclusivity – organisations such as Diversity VC and Your Startup, Your Story (YSYS) have outlined important ways to achieve this. Government leadership with the Investing in Women Code is another example of addressing diversity and inclusion.
Let’s create a procurement and regulatory landscape that allows edtech, AI, cybersecurity and healthtech startups to emerge alongside fintech as the jewels in the crown of London and UK tech and to drive exports around the world.
UK trade secretary Liz Truss announced a future trade strategy for tech during London Tech Week to boost digital trade globally – initiatives such as this will greatly help the sector at this critical time.
Prior to the pandemic, the London and UK tech sectors had consistently demonstrated strong fundamentals over the past several years in terms of growth, investment, innovation and dynamism – and now more than ever, the tech sector holds the key to the nation’s economic recovery.
We must collectively give the sector everything it needs to thrive and celebrate once we get through the current economic downtown which is hitting startups hard.