Startups Weekly Round Up: 27 March

Welcome to Startups’ Weekly Round Up, where we bring you the latest headlines to keep you in the loop with everything that’s affecting SMEs in the UK.

The highlights this week:

• TechNation’s final report predicts the UK tech sector could reach $4tn by 2032 in value
• Almost half of UK workers want to upskill in the midst of an impending recession
• The weaknesses behind the R&D Scheme

Some Stats to Start Up your week

• Strikes cost SMEs 680,000 days of trading per month since the summer.
• Only 30% of organisations have updated their absence policies to reflect hybrid working.
• 31% of consumers say that quality of products and services is more important now than it was a year ago, despite the cost of living crisis.
• Loss of business confidence has lowered high street banking lending to SMEs from £4.8bn in Q4 2021 to £4bn in Q4 2022.

11 Downing Street and the UK economy – What should startups know?

💀 Upskilling to avoid the job killing → almost half of UK workers want to upskill in the face of a potential recession, but many feel employers are blocking them from doing so. 76% of workers are willing to upskill in their own time if the training was funded by employers. However, there is a generational divide. 61% of over 45s are not looking to upskill, believing their current skills will help them weather the economic storm. In contrast, under 35s are looking to diversify their skillset or have already done so to prepare for a potential recession.

💅 The importance of giving your office a glow up → office appeal is yet to be revived three years after the first COVID19 lockdown, giving workers less of an incentive to commute into work. A study conducted by Unispace of 3,000 office workers across Europe revealed that 74% of staff would be happier to return to the office if it had separate spaces for collaborative activities and individual focus work. Lawrence Mohiuddine, CEO EMEA at Unispace confirms, “Simply mandating returns without rethinking the workspace will be detrimental to staff retention, motivation and engagement.”

🔍 R&D dead ends → over the last 18 years, £239 million of funding (5% of total) was committed to 2,270 companies that have since dissolved. Further, £1.05 billion invested in 2,630 companies identified as being at high risk of dissolution. This represents a low return on investment for taxpayers’ money through the R&D scheme. However, the creation of the DSIT could potentially represent an opportunity to correct these gaps and short-termism in R&D funding. Robert Garbett, Founder of Drone Major Groups,explains, “Many of the ‘Innovation funding’ organisations that distribute much of this funding are private companies whose entire business is based on bidding for expanding Government money.” He reveals, “This has resulted in the emergence of a self-perpetuating industry focused almost entirely on handing out taxpayers’ money, without a proper strategy for how to bring important emerging technology to market.”

The Future of Tech: TechNation’s Final Report

TechNation’s final report, following its closure, predicted that UK tech has the potential to quadruple in value by 2023 if the right conditions are nurtured. Accounting for the peaks and troughs of the UK’s tech growth rate over the last decade, the UK tech ecosystem could reach $4tn in 2032 if better conditions for scaling are created and the current momentum is maintained.

However, there are some emerging challenges that could hobble this momentum. Although UK startups raised £30bn in 2022 –72% higher than in 2022 –, it is lower than in 2021 when funding peaked globally. The UK also took back its position as the third largest ecosystem in the world for venture capital investment in 2022 though is likely to see increasing pressure from India, Indonesia and Mexico over the next five years.

2022 also saw a decline in the rate of unicorn creation at 4%, underpinned by a reduction in the number of new unicorn companies being founded year on year for the last 18 months.

Stephen Kelly, Chairman at TechNation, is clear who is responsible. “The government needs to develop a plan that creates the environment and platform for UK tech to be the rocket fuel for growth in the economy and address some Achilles heels of the UK economy.”