West Coast investment into the UK breaks £1 billion for the first time

Posted: 17/04/2018

• Investment deals from Silicon Valley into UK tech companies have increased by 252 per cent since 2011
• Vast majority of US investment goes to tech companies operating in the Golden Triangle – London, Oxford and Cambridge
• New report from Penningtons Manches maps US investment into UK companies

Leading UK law firm Penningtons Manches has today revealed that British companies are enjoying an unprecedented period of investment from West Coast-based US firms, with 74 deals contributing to a total value of £1.08 billion in 2017 – the first time Silicon Valley investment into the UK has broken the billion-pound mark.

The new report from Penningtons Manches, From the Golden Gate to the Golden Triangle, finds that software companies take the lion’s share of this investment, benefiting from £2.2 billion in funds since 2011. The number of deals from Silicon Valley into UK firms has increased by 252 per cent over that period.

Many of these companies are based in the UK’s Golden Triangle - between 2011 and 2017, 79% of all US investment into UK firms went to those based in the area that includes London, Oxford and Cambridge.

Life science firms were the second most invested in, taking £472 million from West Coast investors since 2011, with hardware companies and medical tech following with £207 million and £58 million respectively.

West Coast investors may have been involved in more deals, but the research found that East Coast investors have provided more capital. They invested £1.31 billion into UK companies in 2017. Between 2011 and 2017, the total number of deals by East Coast investors into UK companies rose by 48% from 29 to 56.

The investment reflects a wider trend of inward investment into UK companies which is seeing a rise across the board. Despite concerns about Brexit, the report unveils a 62% increase in foreign investment into UK firms in 2017, a third of which were by North American investors and a quarter by those in the United States. Investors from outside of the UK were involved in £5.9 billion worth of deals, a 187% rise on the previous year and eight times the amount in 2011.

Corporate partner Matt Martin comments: “We are delighted that the findings from the report reveal such appetite from West Coast investors to nurture Britain’s most innovative, high potential firms. Penningtons Manches has a long history of working with technology firms, their innovators and their investors, and we have developed meaningful connections between our US clients and the fast-growth tech businesses in the UK that we represent. We look forward to supporting this continued interest from US investors into the future.”

The report also sheds light on the reasons that UK firms seek US investment. From a survey of British firms considering US investment, the top reasons for looking West are:

• Greater access to US markets – 83% of non US-backed firms cited access to markets as a reason to take US investment
• Existing relationship with investor – 48% of UK companies who have already done deals with US-based firms said that their primary driver for taking more US investment was their existing relationship with their investor
• Technical expertise of investor – 46% of non US-backed firms cited this as a reason for seeking US investment
• Favourable investment climate – 44% of non US-backed firms cited this as a reason to take US investment

The report also finds that Brexit has had a mixed impact on US investment into UK firms. Despite the fact that devaluation of the pound has reportedly created a surge of British exports since Brexit, the research finds that companies that have raised smaller amounts are more likely to believe it has had a beneficial impact: 100% of British companies surveyed who have raised between £100,000 and £500,000 believe currency fluctuations have been beneficial, but only 42% of those raising £1 million - £5 million felt the same.

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