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Data from accounting firm RSM UK shows that the number of tech startups established in the UK has seen a “significant decline” for the first time since 2022. In the second quarter of 2024, the number of newly established technology companies in the UK was only 12,318, compared with 13,802 in the first quarter, a drop of 11%.
The number of tech companies is seen as a good indicator of industry growth, and so far the numbers are pointing to a boom. The largest number of technology companies in five yearsThe total number of startups established in 2023 increased by 22% compared to 2022, accounting for Largest percentage increase ever.
Ben Bilsland, Partner and Head of Technology, RSM UK In a press release The latest data suggests that “the trend of technology growth may be reversing.”
He said: “On the one hand, the new government is struggling to tackle a £22 billion budget deficit, on the other hand, it cannot ignore the strong tech sector which contributes around £150 billion to the UK economy every year.”
“With this in mind, and with high interest rates and stubborn inflation continuing to present economic challenges, we encourage the government to do everything it can to sustain growth in the sector.”
Last week, news broke that the New Labour government £1.3 billion funding round cancelled The Conservatives have earmarked the money for AI infrastructure. The King’s July Speech also made few references to the tech sector and did not formally announce any new legislation around the industry, including the expected AI bill.
“We need the government to refocus on the big picture and support the sector to develop technology that will enable the UK to compete on the global stage,” said Bilsland. “In the US, tech giants such as Google and Amazon have created huge economic growth. This begs the question: can the UK government afford not to invest in the tech sector?
“The King’s Speech feels like a missed opportunity to address the technical skills gap and tackle the field of artificial intelligence through further training. Despite limited resources, we urge the new Labour government to consider helping the industry in the next budget, providing better tax relief and deep computing access to support the development of AI.”
London was the region with the most tech company registrations in the second quarter, with 6,170 tech companies registered. However, this number was down 16% from the first quarter. In fact, all regions of the UK saw a decline in the number of tech company registrations compared to the previous quarter, with the largest drop being in Northern Ireland, which fell 22%.
Despite a decrease in the number of new tech startups formed over the past six months, most regions do have more tech companies in Q2 2024 than in Q2 2023. This is particularly the case in the North East and Scotland, where the number of tech companies increased by 38% and 22% year-on-year respectively. The number of tech companies in the UK as a whole was 0.2% higher in Q2 2024 than in Q2 2023.
It’s not just the UK tech sector that’s affected
On Monday, the share prices of the “Big Seven” in the United States – Nvidia, Meta, Alphabet, Microsoft, Amazon, Tesla and Apple – all fell sharply, with a combined decline of $1.3 trillion The sell-off was related to a variety of factors, but the main reason was that investors began to worry about the return on investment in artificial intelligence.
Alphabet spent $13.2 billion on investments in AI infrastructure in the second quarter, 91% more than in the second quarter of 2023, putting pressure on profit margins. Meta CEO Mark Zuckerberg also said on the earnings call that he Expected to take “several years” Before the company monetizes its AI products.
Jim Covello, an equity analyst at Goldman Sachs, wrote in a recent article: Report“Despite its high price, the technology is still far from being useful… Overbuilding things the world doesn’t use or isn’t ready for usually leads to bad results.”
David Cahn, partner at Sequoia Capital Blog Posts The AI industry must generate $600 billion in revenue each year to pay for hardware spending.
Semiconductor companies are facing their own problems, with share prices of Intel, Samsung, TSMC and Arm Holdings parent SoftBank Group all falling sharply on August 1.
Intel shares fell 26%, their biggest one-day drop in 50 years, after the company suspended its dividend and cut 15% of its workforce. The moves, an attempt by the company to regain industry dominance after being overtaken by many rivals in the S&P 500, weighed on semiconductor stocks worldwide. Nvidia is rumored to be Delayed release of new chips Its stock price also fell 6.3% due to the design flaw.
Investors are also preparing US rate cuts coming soonmeaning they prioritize small-cap stocks, which tend to benefit more from lower interest rates.
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