South West tech incorporations jump 25 per cent in 2021

The number of new tech companies incorporated in the South West jumped 25 per cent in 2021, according to new analysis by leading audit, tax and consulting firm RSM UK.

A total of 1,445 tech businesses were incorporated in the region in 2021 according to an analysis of data held by Companies House, up from 1,156 in 2020.

Ben Bilsland, partner and Media and Technology senior analyst at RSM UK, said of the findings: "Our analysis shows an unprecedented level of tech incorporations. It is no surprise that the UK has seen an enormous number of new incorporations as the UK forms a powerhouse within the European Tech ecosystem, estimated at $3 trillion. Estimates of the median valuation of a late-stage, pre-money UK tech business rose to €15m in 2021, from below €10m in 2020.

"The South West has a deep tech ecosystem across a range of disciplines, in particular software. The average pre-money valuation for late-stage software businesses rose to €26.2m in 2021. This bodes well for the region but also brings into focus a growing shortfall in talent. Whilst a greater number of new businesses will hope to take advantage of the buoyancy in the market, they will face a significant task recruiting and retaining excellent people. The ability to live in the South West but work remotely is a double edged sword, as whilst this attracts good people to a fantastic area of the UK, they may not be making direct contribution to businesses operating in the region’s ecosystem.

"Software solutions that can be entrenched within existing global industries have proven particularly attractive where they bring the benefit of reduced costs and increased productivity. Increasingly, the average business will leverage tech enabled solutions which leads to more and more companies perceiving themselves to be a tech business than in the past. Continuing advancements in computing power, wide-spread 5G and increasing interest in new ideas such as the metaverse is likely to accelerate this trend."

Overall, UK tech incorporations increased 62 per cent in 2021, from 23,579 to 38,240.

In addition, the UK tech sector this year became only the third economy, alongside the US and China, to reach $1 trillion in value after a surge in growth throughout the pandemic. The UK’s digital industry is now worth more than double Germany’s equivalent, its closest European rival. RSM’s latest analysis further evidences the UK’s key role in supporting entrepreneurs and encouraging innovation.

Tech company incorporations by year