The United Kingdom hosts approximately 3,500 deeptech companies, as revealed in a new report on the UK’s deeptech ecosystem. This report, commissioned by the Royal Academy of Engineering’s Enterprise Hub, focuses on companies involved in emerging technologies such as AI, robotics, and virtual reality. However, the report highlights a significant gender imbalance within the sector, noting that over 77% of the founding teams are exclusively male. Mixed-gender founding teams make up only 15%, while a mere 7.5% of these companies are founded solely by women.

Deeptech is characterised by its focus on advanced engineering and scientific innovations, often requiring substantial capital, extensive research and development, and significant time investment.

Titled ‘The State of UK Deep Tech’, the report, derived from data sourced from Beauhurst, indicates a more noticeable gender disparity in the deeptech sector compared to the broader high-growth ecosystem. This issue is partly attributed to the traditionally low number of women pursuing STEM subjects in the UK. It also suggests that investor biases and a lack of adequate support for women entrepreneurs could be contributing factors.

The report also sheds light on the challenges within the funding landscape for UK deeptech companies. Despite a surge in investment activities in 2021, there has been a recent decline, with the total number of deals slightly dropping from 1,194 in 2021 to 1,181 in 2022. Over half of these companies are at the seed stage, and active scaleups account for less than 6% of all deeptech companies in the UK. This points to a critical need for improved access to funding, enabling early-stage companies to grow and strengthen the UK's competitive position in the deeptech sector.

This comprehensive analysis of the UK's deeptech ecosystem examines various aspects including geographic distribution, sub-sectors, investment levels, growth trajectories, and the composition of company leadership in terms of gender, age, and nationality. The report aims to contribute to broader discussions and future policy-making to support engineering entrepreneurs.

Findings in the report include:

• The UK is home to 3,462 active deeptech companies – with the majority based in London (1,057), followed by the South East (480), the East of England (425) and Scotland (282)
• Deeptech companies attracted a total of £5.22bn in 2022 – but the number of deals secured by deeptech companies decreased from 1,194 in 2021 to 1,181 in 2022, due to an increasingly complex funding environment
• Clean tech and artificial intelligence dominate UK deeptech – with 517 companies, clean tech ranks first amongst the sub-sectors within the broader deeptech landscape, closely followed by 504 AI companies
• There are 591 active deeptech spinouts from 68 universities, representing 17% of the deeptech sector’s total business
• In the last ten years, 34 of the UK’s deeptech companies have listed on a stock exchange, including 15 academic spinouts. They have largely listed on UK-based exchanges such as the London Stock Exchange or Alternative Investment Market but 10 of them floated on the US-based NASDAQ Stock Market
• North American acquirers play a notable role in the exit dynamics for UK deeptech companies, accounting for 56 of the 176 acquisitions that have taken place in the last decade. US buyers have a dual appeal: diversity of size and focus, and greater financial resources than their UK counterparts.

The State of UK Deep Tech will also continue to inform the work of the Royal Academy of Engineering’s Enterprise Hub in supporting deeptech entrepreneurs. Celebrating its 10th anniversary in 2023, the Enterprise Hub supports some of the sector’s fastest-growing companies such as Manchester-based Holiferm and Edinburgh-based Crover, referenced in the report.

Michelle Donelan, Secretary of State for Science, Innovation and Technology, said: “We are a global leader in artificial intelligence, quantum computing and other emerging forms of deeptech. To maintain this position, we are working closely with partners like the Royal Academy of Engineering to harness talent up and down our country.

“I am committed to boosting STEM up-take among people from all backgrounds, to ensure everyone can fulfil their potential as we build a highly skilled workforce in the industries of the future.

“At the same time, we are backing innovation here and now; our recent reforms to rules on spinouts stakes will support more innovators to turn their ideas into blossoming businesses that create those expert jobs and grow our economy.”

Ana Avaliani, Director of the Royal Academy of Engineering’s Enterprise Hub, said: “The State of UK Deep Tech report presents a comprehensive exploration of the cutting-edge advancements and technological landscape in the UK. It offers insights into current trends, challenges, and the transformative potential that deeptech brings to the UK’s technological evolution.

“While there is much to celebrate, the State of UK Deep Tech underlines the important work still to be done to support deeptech founders to scale and grow their companies in the UK. It is also vital for a more successful, inclusive ecosystem that the gender imbalance in deeptech leadership is addressed and that leadership diversity in deeptech enterprises is championed.

“This report reflects the progress that a thriving ecosystem can achieve in shaping the critical technologies for the future, developing solutions in everything from AI to semiconductors, engineeirng biology to telecommunications. Deep tech is engineering a legacy of excellence with companies creating economic growth and innovations right across the UK that are pushing the boundaries of what’s possible.”