London tech incorporations boomed last year

The number of new technology companies incorporated in London increased 21% in 2022*, according to analysis of Companies House data by leading audit, tax and consulting firm RSM UK.

A total of 24,783 tech businesses were incorporated in London last year, up from 20,552 the previous year. Richard Heap, partner, RSM UK, said: ‘London is Europe’s leading tech hub, accounting for 60% of the total incorporations in 2022 which is in line with the prior year.

‘Globally, London is one of the leading tech cities, with the majority of the UK’s unicorns calling the capital home. The thriving ecosystem coupled with access to funding and investment, makes it a great place for start-ups. The volume of activity and many tech success stories in the city have been a key driver for the UK tech industry as a whole receiving a $1tn valuation. Despite venture capital investment dropping by 30% in 2022, London continued to attract the majority of the funding.

‘The Covid-19 pandemic will have driven the high increase in 2021, along with rocket fuelled digitalisation. Another thing to consider is that digital is seen as a driver of the economy, with the digitalisation trend continuing at a rapid pace. The new ways of working have accelerated a change in attitude, with companies and individuals more willing to do things digitally and importantly, this is helping combat some of the rising costs. It is also important to mention the government’s new Department for Science, Innovation & Technology, which we expect to help drive numbers higher in the future, as it gets more money into the right pockets.’

Nationally, 46,474 tech businesses were incorporated in 2022, up from 38,240 in 2021. The total number of incorporations in 2022 is nearly double the 23,531 companies in 2020, demonstrating sustained growth in new tech incorporations year-on-year.

The data cements tech as an area of huge growth across the UK. All regions in the UK saw an increase compared to 2021, and eight of the ten regions saw increases on or above 22%.

Ben Bilsland, partner and Technology Industry Senior Analyst at RSM UK, said: ‘Despite the obvious economic challenges, it’s been another strong year for the tech industry. Whilst it is no surprise to see London at the centre of new tech incorporations, growth across all regions outside the capital is further evidence of the UK’s thriving tech industry. There is clearly appetite from entrepreneurs to start up new, innovative businesses and become part of the UK’s booming tech industry.

‘This crop of early-stage businesses will need support to scale. Access to funding will be crucial and the UK government will need to ensure that UK tech is an attractive place for both domestic and overseas investment. For many young innovative companies, R&D tax incentives are crucial cash inflows. For many, the recent changes to UK R&D schemes that reduced the amounts small companies can claim were not seen as a positive step towards supporting the early-stage ecosystem.

‘Innovation requires a world-class talent pool and UK tech will look to both education and immigration to build their workforces. Support from our universities and schools to build skills in STEM subjects and emergent areas such as Artificial Intelligence will be essential. Clarity over immigration policy will be required to ensure a healthy inflow of tech talent to fuel growing companies.’