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UK tech sector investment hits record £13.5 billion in 2021

However, investors are concerned the government's Digital Markets Unit will make UK startups less attractive

The UK's tech sector is on course for a record year of investment with £13.5 billion of venture capital coming into the country during the first six months of 2021.  

The figure is almost triple the amount made over the first six months of 2020, according to the UK's Digital Economy Council and Tech Nation, and more than France, Germany and Israel combined.

A handful of so-called 'mega' funding rounds have propelled some of the UK's brightest startups towards unicorn status. Virtual events platform Hopin raised over £289 million from one round alone, cementing its status as the fastest-growing European tech firm ever.

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Over 1,400 UK tech companies have benefited from the £13.5 billion raised and the investment is more than double that achieved in the next biggest market, Germany, which has so far raised £6.2bn in 2021. 

"The success of established companies like Darktrace and Depop show there is a clear pathway for UK tech companies to make an impact on a global scale, and at Tech Nation we will continue to support entrepreneurs and startup founders as they grow their businesses from first investment cheque all the way to IPO," said Gerard Grech, the founding chief executive of Tech Nation.

While investment in the UK tech sector is currently very healthy, there are growing fears that future government plans may negatively impact it. A recent report from the Coalition for a Digital Economy (Coadec) suggests that the Digital Markets Unit (DMU) could make startups less attractive if it restricts their ability to be acquired by larger tech firms.

The DMU is a new body that sits inside the Competition and Markets Authority for the sole purpose of reining in tech giants that buy smaller firms to squash competition. A consultation is being launched in October to determine the full powers of the unit, but there are suggestions it will be able to investigate and block larger deals that impact competition.

Where acquisitions and exits were concerned in the Coadec report, an overwhelming majority of investors felt that regulators didn't understand the importance of mergers and acquisitions to the UK's startup ecosystem, with 90% adamant that the ability to be acquired was important to sectors overall health.

What's more, 50% of investors said they would significantly reduce the amount they invested into UK startups if the ability to exit was restricted, with 22.5% suggesting they would stop investing entirely. 

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