Digital Minister pushes UK tech as sector sails past $1tn valuation
Digital minister Chris Philp has today called for UK institutional investors to step up and back homegrown tech firms as the sector sails beyond a total $1tn valuation today.
Speaking at the EmTech Global conference in London yesterday, Philp said that the UK’s booming tech sector presented a major growth opportunity but institutional investors in the UK were currently missing out.
“I see an opportunity for UK financial institutions, particularly pension funds, to allocate more capital to pre-IPO, UK Tech, where there are massive growth opportunities,” he said.
“Look at a firm like Darktrace, they’ve gone to huge valuation increases, pre IPO, and those value increases have been captured by non UK investors.”
Ministers have been consulting on changes to rules this year which could free up pension funds to back growth tech firms via venture capital and private equity, but pension cash has typically been locked out of such investments due to the higher money management fees charged.
Calls for changes to the regulation were reignited this month when Canadian pension scheme the Ontario Teachers Pension Plan led a funding round into UK fintech Lendable.
Philp’s comments came as the UK’s tech sector passed a total $1tn valuation, making it the third nation to reach the landmark after the US and China, according to Dealroom data analysed for the UK’s Digital Economy Council.
A surge in investment into London’s digital economy has catapulted the valuations of many companies from unicorns – companies valued at $1 billion or more – to decacorn status, worth over $10 billion or more.
The UK is now home to 13 decacorns, 11 of which are based in London and are the most highly valued tech companies in the country.
Dealroom data found that the UK’s tech ecosystem was valued at $446bn in 2018 but surged 42 per cent to $942bn in 2020 as the pandemic sparked a major surge in investment.
“It’s brilliant to see how every tech company in the UK, from early-stage startup to global leading decacorn, has a part to play in lifting up the ecosystem and making it thrive,” Philp said.
Speaking yesterday Philp said there was also a wave more funding on the horizon as planned changes to EU-era Solvency II regulation, which requires insurance firms to hold huge amounts of cash on their books, could also be used to free up institutional investment.
Changes to the rules were announced by City Minister John Glen earlier this month, and Philp said that scrapping the regulation would allow firms to invest in tech “both pre and post IPO”.
Insurance experts have queried the impact of Solvency II reform in freeing up investment into growth opportunities like tech until now, saying that even after changes come into effect investment is likely to be limited to areas like infrastructure.
“The Solvency II reforms are still quite vague about where they will go, a lot of the discourse is focused around infrastructure and energy investment,” said Hugo Laing, partner at Eversheds Sutherland specialising in the insurance sector.
“I could see the potential trajectory to encourage funding would be making the capital treatment better for those kind of investments.”