Investment in UK technology companies continues apace, with 2021 marking another record year. The UK government announced in December 2021 that the UK tech sector achieved its “best year ever” in 2021 through investments totaling £29.4 billion, with record IPO capital raising and 37% of all funding coming from the United States. The United Kingdom is creating on average almost one $1 billion “unicorn” technology business a week, primarily fintechs followed by healthtech and enterprise software businesses.
As for public investment, The Guardian reported that UK government spending on R&D is estimated to reach £14.9 billion for 2021 and 2022, and the government aims to increase this to £22 billion by 2026–27.
In furtherance of the UK government’s wish to make direct investment in fledgling technology companies, following the United Kingdom’s departure from the European Union (EU) and therefore from the economic bloc’s “state aid” rules—which generally prevent EU member states from granting financial support to businesses in a way that distorts competition and interstate aid within the European Union—the United Kingdom is in a position to implement a new subsidy regime. This is currently going through Parliament and is intended to allow greater flexibility for the distribution of grants and funding by the UK government.
PROPOSED SUBSIDY CONTROL BILL
The Subsidy Control Bill (the Bill) sets out when and how businesses can receive public funding from the UK government, in replacement of the EU state aid regime following Brexit. While the Bill does not express any priority for a particular sector or industry, it does enable the government to establish a “streamlined” subsidy scheme that is intended to be used in support of the UK government’s investment priorities.
We have already seen recent, significant public investment in UK tech, such as the Future Fund, that support the growth of various tech companies that have gone on to list in the United Kingdom, New York, and elsewhere. The Bill is therefore of great interest to innovative UK tech companies that could benefit from the proposed increased levels of public investment in such companies.