UK Tech SMEsDriving EconomicGrowth and Innovation October 2024 About techUK Over 650 of our members are SMEs. We provide our SME community with opportunities tonetwork and collaborate with their peers, industry leaders,and customers in both the private and public sector. Our relationship with government and regulators allows usto advocate for regulatory solutions and policy that help ourSME members to compete and grow. Contents Executive SummaryData Highlights0406 Main ChallengesRecommendations0708 The UK Tech SME Ecosystem10 Regional Breakdown14 Interview Analysis - Main Challenges Facing UK SMEsScale-Up Investment2526 Grants and Tax ReliefsGenerating Sales OpportunitiesPublic Sector ProcurementTalentRegional ChallengesCashflow Future Success - What are the Benefits of Supporting Tech SMEs?Next Steps5659 Executive Summary Technology SMEs are central to the modernsuccess story that is the UK’s technology industry.Our SMEs have pioneered innovations in emergingtechnologies, created highly skilled and highlypaid jobs, transformed public services, and led theemergence of regional tech clusters. To better illustrate the critical impact of tech SMEs acrossthe nations and regions, techUK has combined quantitativedata provided by Beauhurst and qualitative interviewsconducted with Kytemark. This report provides both thecurrent macroeconomic picture of tech SMEs, but also theeconomic and social impact of individual tech SMEs.It unearths some of challenges they face in achieving theirgrowth ambitions, and outlines how some of the solutionspresented in techUK’s recent Growth Plan can addressthese challenges to ensure the UK economy and societyfully benefits from these world-leading companies. The data echoes what we already know that SMEs arecentral to economic growth of the UK. The data reveals the Beyond the data, the tech SMEs interviewedoutlined the invaluable impacts they are makingin the UK right now. The conversations withSMEs unearthed the real successes they arehaving in driving economic growth across thenations and regions and delivering real-timesolutions to some of the UK’s most challengingissues. Reducing hospital waiting times, savinglives in conflicts, and drastically cutting carbonemissions are just some of the impacts techSMEs across the UK are making. Combinedwith this, they are at the cutting edge of leadingBritish innovation, spearheading developmentsin AI, quantum and net zero technologies. breadth and diversity of tech SMEs currentlyoperating in the ecosystem. There are over190,000 tech SMEs across the UK employingnearly 700,000 people. This is nearly double theamount ten years ago. Whilst the majority ofthese continue to be based in London and theSouth-East, the strong presence of tech SMEs inGreater Manchester, West Yorkshire and WestMidlands shows the continued success of thesetech clusters. the UK is losing the economic and socialbenefits from these companies in the form ofjobs, future tax revenues, and the innovationsdeveloped. Even with these challenges, the tech SMEsinterviewed remain positive, and had plans toexpand their growth and innovation, creatingmore jobs and delivering the technologiesthe UK desperately needs. By addressing thechallenges outlined, the UK could not onlyaccelerate the growth of tech SMEs and addmore highly-skilled jobs to the economy, but alsofeel the benefits across society – transformingpublic services, enhancing the UK’s defencecapabilities, boosting UK productivity, anddrastically reducing carbon emissions. Software companies continue to dominate theindustry, but there are also thousands of techSMEs within the UK’s leading industries, suchas HealthTech. The average age of a tech SMEat 7.5 years illustrates that, whilst the industrycontinues to spin out and found innovativestart-ups, the tech SME ecosystem possessesstrong experience and expertise. Some of theSMEs interviewed for the purpose of this reporthave decades of experience in the industry, suchas Sapphire, Jadu and SEBi. On finance andfunding, the data illustrated that only 7% of techSMEs have received equity investment and 2%have received a large innovation grant. Despite the successes, tech SMEs continueto face significant challenges and barriersto furthering their growth and innovation.Insufficient funding, significant digitalskills gaps, difficultly in generating salesprospects, particularly in a burdensome publicprocurement, and regional inequalities, are allpreventing tech SMEs from unleashing theirfull potential to the benefit of the UK economyand society. Many are closing or relocating tooverseas markets, namely the US. As a result, Data highlights average age ofa tech SME7.5 years 700,000people employedby tech SMEs 191,000tech SMEsin the UK 2%tech SMEsreceived a largeinnovation grant 7%tech SMEsreceived equityinvestment Main Challenges Commercialisationof innovativetechnologies Generating salesprospects in publicand private sectors Access toscale-upfinance Region