- First ever report on the state of the national deep tech ecosystem from the Royal Academy of Engineering shows that UK deep tech is dominated by men, with just 7.5% of UK deep tech companies founded by all-female teams.
- Funding challenges persist as report finds that active scaleups represent only 6% of deep tech companies, alongside a decrease in total number of deep tech deals secured in 2022.
The UK is home to nearly 3,500 deep tech companies based on emerging technologies, from AI and robotics to virtual reality, according to the UK’s first comprehensive report analysing the national deep tech ecosystem, commissioned by the Royal Academy of Engineering’s Enterprise Hub. However, the sector is dominated by men, with more than 77% of founding teams being all-male. Only 15% of founder teams are mixed gender and just 7.5% are founded solely by women.
Deep tech encompasses a broad and evolving spectrum of innovative technologies grounded in innovative engineering and cutting-edge scientific advances – they tend to be capital, time and R&D intensive.
The State of UK Deep Tech, based on data commissioned from Beauhurst, reveals that the deep tech sector has a more pronounced gender disparity than the wider high-growth ecosystem[1], and the report attributes this, at least in part, to the historically low proportion of women studying STEM subjects in the UK[2]. It may also reflect investor attitudes and the need for more robust support for women entrepreneurs.
The report also indicates that a complex funding environment continues to challenge the growth of UK deep tech companies. Following high levels of investment activity in 2021, recent investment activity has slowed with the total number of deals secured decreasing from a peak of 1,194 in 2021 to 1,181 in 2022. Over 50% of deep tech companies are currently at seed stage, with active scaleups representing less than 6% of all deep tech companies in the UK, highlighting an urgent need to improve funding access to enable early-stage deep tech companies to upscale and create a more competitive UK ecosystem.
The report assembles the first detailed picture of the deep tech ecosystem in the UK, analysing the geographic distribution of this key part of the economy and identifying sub-sectors, level of investment, investors and investees, growth trajectories, accelerators, funding and leadership composition - including gender, age, and nationality. It aims to inform wider debate and future policy to support engineering entrepreneurs.
Findings in the report include:
- The UK is home to 3,462 active deep tech companies – with the majority based in London (1,057), followed by the South East (480), the East of England (425) and Scotland (282).
- Deep tech companies attracted a total of £5.22bn in 2022 – but the number of deals secured by deep tech companies decreased from 1,194 in 2021 to 1,181 in 2022, due to an increasingly complex funding environment.
- Clean tech and artificial intelligence dominate UK deep tech - with 517 companies, clean tech ranks first amongst the sub-sectors within the broader deep tech landscape, closely followed by 504 AI companies.
- There are 591 active deep tech spinouts from 68 universities, representing 17% of the deep tech sector’s total business.
- In the last ten years, 34 of the UK’s deep tech companies have listed on a stock exchange, including 15 academic spinouts. They have largely listed on UK-based exchanges such as the London Stock Exchange or Alternative Investment Market but 10 of them floated on the US-based NASDAQ Stock Market.
- North American acquirers play a notable role in the exit dynamics for UK deep tech companies, accounting for 56 of the 176 acquisitions that have taken place in the last decade. US buyers have a dual appeal: diversity of size and focus, and greater financial resources than their UK counterparts.
The State of UK Deep Tech will also continue to inform the work of the Royal Academy of Engineering’s Enterprise Hub in supporting deep tech entrepreneurs. Celebrating its 10th anniversary in 2023, the Enterprise Hub supports some of the sector’s fastest-growing companies such as Manchester-based Holiferm and Edinburgh-based Crover, referenced in the report.
Michelle Donelan, Secretary of State for Science, Innovation and Technology, said:
“We are a global leader in artificial intelligence, quantum computing and other emerging forms of deep tech. To maintain this position, we are working closely with partners like the Royal Academy of Engineering to harness talent up and down our country.
“I am committed to boosting STEM up-take among people from all backgrounds, to ensure everyone can fulfil their potential as we build a highly skilled workforce in the industries of the future.
“At the same time, we are backing innovation here and now; our recent reforms to rules on spinouts stakes will support more innovators to turn their ideas into blossoming businesses that create those expert jobs and grow our economy.”
Ana Avaliani, Director of the Royal Academy of Engineering’s Enterprise Hub, said:
“The State of UK Deep Tech report presents a comprehensive exploration of the cutting-edge advancements and technological landscape in the UK. It offers insights into current trends, challenges, and the transformative potential that deep tech brings to the UK’s technological evolution.
“While there is much to celebrate, the State of UK Deep Tech underlines the important work still to be done to support deep tech founders to scale and grow their companies in the UK. It is also vital for a more successful, inclusive ecosystem that the gender imbalance in deep tech leadership is addressed and that leadership diversity in deep tech enterprises is championed.
“This report reflects the progress that a thriving ecosystem can achieve in shaping the critical technologies for the future, developing solutions in everything from AI to semiconductors, engineeirng biology to telecommunications. Deep tech is engineering a legacy of excellence with companies creating economic growth and innovations right across the UK that are pushing the boundaries of what’s possible.”
[1] For the wider high-growth ecosystem, the equivalent figures are 75.4%, 11.8%, and 12.8%, respectively
[2] Higher Education Statistics Agency, www.hesa.ac.uk
Notes for editors
- The Royal Academy of Engineering is harnessing the power of engineering to build a sustainable society and an inclusive economy that works for everyone.
In collaboration with our Fellows and partners, we’re growing talent and developing skills for the future, driving innovation and building global partnerships, and influencing policy and engaging the public.
Together we’re working to tackle the greatest challenges of our age. - The Enterprise Hub supports talented entrepreneurs and decision makers to transform breakthrough engineering innovations into disruptive spinouts, startups and scaleups. Since launching in 2013, we have supported over 350 researchers, recent graduates, and leaders of SMEs to start and scale up businesses that can give practical application to innovative engineering solutions. We’ve awarded over £11 million in grant funding, and our Hub Members have gone on to create almost 6000 jobs and raise over £1.3 billion in additional funding.