Growth in the UK’s booming tech sector is stalling, new data suggests, with new data pointing to a sharp slowdown and making for “uncomfortable reading” in light of the sector’s recent success.
The number of new technology companies incorporated in the UK fell by 11 per cent in the second quarter of this year, marking the first “marked decline” since early 2022, according to audit, tax and consulting firm RSM UK.
In the second quarter, 12,318 new tech companies were registered, up marginally on the same period in 2023, but down from 13,802 in the first quarter. A slowdown was felt across all regions.
It follows a record-breaking 2023, which saw 51,017 new tech companies created in the UK, the highest number in five years.
In London, which maintained its lead in tech incorporations compared to other UK regions, growth fell more than the national average, at 16 per cent.
The capital registered 6,170 new tech companies in the second quarter of 2024, down from 7,253 in the first quarter and a slight one per cent decline from the same period last year.
“These latest Q2 figures indicate that, as anticipated, the tide may be turning on tech growth,” said Ben Bilsland, partner and head of technology at RSM UK.
Bisland continued: “This might present as uncomfortable reading for both the industry and government.
“Whilst on one hand the new government is grappling with a £22bn budget shortfall, on the other, it can’t afford to take a strong tech sector, that contributes around £150bn a year to the UK economy for granted.
“We need a renewed focus on the bigger picture from government, supporting the sector to develop technology which enables the UK to compete on the global stage.”
The head of technology at RSM UK added: “In the US, tech behemoths such as Google and Amazon create huge economic growth. This begs the question can the UK government afford not to invest in the tech sector?”
Last week it emerged that the government has shelved £1.3bn in promised funding for tech and AI projects that was promised by the Conservatives. The move was slammed as “idiotic” and risked pushing more entrepreneurs to the US.
The Department for Science, Innovation and Technology (DSIT) defended itself, citing “difficult and necessary spending decisions across all departments in the face of billions of pounds of unfunded commitments”.
The Conservatives said that under its leadership, DSIT had underspent.