Fears that UK’s tech boom could be over

The number of new UK technology incorporations has dropped following a period of sustained growth.

According to analysis by leading audit, tax and consulting firm RSM UK, Q2 2024 figures show the number of new incorporations has reduced by 11 per cent compared to Q1 figures, the first marked decline since Q1 2022.

This is in contrast to the five-year high seen in Q1 of this year and indicates the sustained strong growth in the tech sector has slowed noticeably.

The number of UK tech incorporations was down to 12,318 in Q2 2024 from 13,802 in Q1 2024.

This is still slightly above the year-on-year figure, as Q2 2023 tech incorporations reached 12,285. This recent decline follows a record-breaking 2023 which saw an annual total of 51,017 new tech incorporations.

Ben Bilsland, partner and head of technology at RSM UK, said: “This year got off to a flying start, with new UK tech incorporations hitting a five-year high.

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“But these latest Q2 figures indicate that, as anticipated, the tide may be turning on tech growth.

“This might present as uncomfortable reading for both the industry and government. Whilst on one hand the new government is grappling with a £22 billion budget shortfall, on the other, it can’t afford to take a strong tech sector, that contributes around £150 billion a year to the UK economy, for granted.

“With that in mind, and with high interest rates and sticky inflation continuing to present economic challenges, we would encourage government to do all it can to maintain growth in the sector.

“As expected, London accounted for the highest number of incorporations at 6,170 in Q2 2024, but this was down 16 per cent from 7,253 in Q1 2024, and slightly down 1 per cent on last year’s Q2 figure of 6,254 new tech incorporations. While London still leads the way, the slowdown in tech incorporations was felt across all regions in Q2 compared to Q1.”

Bilsland continued: “The good news is that, year-on-year, most regions have still grown slightly when compared to Q2 2023 data.

“The King’s Speech contained little for tech companies, apart from a consultation on artificial intelligence. 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.

“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?

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“The King’s Speech felt like a missed opportunity to address the tech skills gap with further training and tackle the AI landscape.

“Despite limited resources, we’d urge the new Labour government to consider helping the sector at the next Budget, with improved tax reliefs and access to deep computing to support AI advancement.”