Equity investment in UK tech businesses surged by 27% in 2019 to £4bn, according to the British Business Bank’s annual Small Business Equity Tracker report.
This is the highest surge in tech investment since the tracker began in 2011.
The tech sector remains “highly attractive” to equity investors, accounting for 47% of total equity investment in UK SMEs, with 691 deals confirmed in 2019.
Within the industry, software received the largest share of deals, with 425 deals worth £2bn, while life sciences received 78 deals worth £540m.
The verticals attracting the greatest amount of equity investment in 2019 were software as a service, with 471 deals worth £2.5bn and fintech with 193 deals worth £1.8bn.
Software as a service companies were particularly “highly attractive” to equity investors, with investment value increasing by 69% in 2019 compared to 2018, a much larger increase than what was seen across the overall market.
The report also showed that the value of total equity investment in the UK’s smaller businesses rose 24% to £8.5bn in 2019, the highest amount recorded, with a “record” number of deals that rose by 4% to 1,832.
Some 52% of deals took place outside of London, with South West, Scotland and Northern Ireland showing a “strong increase” , with deals rising by 34%, 26% and 24% in 2019, respectively.
Equity investments into growth stage companies also rose by 39% to £5.3bn. The average growth stage deal size also grew by 27% driven by a small number of large deals.
Keith Morgan, CEO of British Business Bank, said: “The UK’s small business equity finance market saw a record year in 2019 with investment amounts soaring to £8.5bn.
“This was a clear sign of investor confidence in UK smaller businesses located across the country and their potential for growth as well as the strong fundamentals of the UK economy as a place to start and grow a business.”
He added: “The British Business Bank’s equity programmes are estimated to have supported around 11% of all equity deals in UK SMEs in 2019. As the economic impact of Covid-19 continues to affect businesses across the country, the work of the Bank has never been more important.
“Ensuring a wide range of innovative and ambitious smaller businesses continue to have access to equity investment to support their growth plans will be essential to the UK retaining its world-leading position in science, innovation and technology.”