UK firms provide Asian investors ways to hedge against trade war

PUBLISHED ON Aug 26, 2019

The UK tech sector has attracted more investment from the US and Asia in the first seven months of this year than it did during the whole of last year.

Japan and Singapore are the biggest Asian investors into UK tech, beating China.

Industry players say lower valuations in the UK due to the weaker pound are attracting investors to the sector.

The pound is currently trading at about a two-year low against the dollar.

Increasingly, UK companies are also heading to Asia to raise capital.

“I’ve seen a lot more requests from UK start-ups tapping Asian markets capital financing in comparison to a year ago,” said Aditya Mathur, founder and managing director of Singapore based venture capital fund elev8.vc.

“They typically want access to the Asian market that is large and diverse, and for that they need an Asian investor to help them understand these markets, and also provide the kind of financing they’re looking for.”

UK tech firms also provide Asian investors with a way to hedge against the trade war, analysts say.

“Foreign investment into both the US and Chinese tech sectors has gone down because of the trade war and because Europe has provided several attractive investment opportunities lately” said Yoram Wijngaarde, founder and chief executive of Dealroom, the company that pulled together the figures for the research.

“The UK provides an attractive opportunity for funds looking to grow their investments.”

Investment from the US and Asia into the UK tech sector totals USD3.7 billion so far this year. That’s in comparison to USD 2.9 billion for the whole of last year.

In total, Asia invested USD 1.8 billion into the UK tech sector in the first half of this year, compared to USD 0.6 billion the year before.

Companies in the UK’s fintech and financial sector are among those that attracted the most interest from Asia’s investors.

In May, Japan’s Softbank bought an $800m stake in Britain’s Greensill, which provides short term loans to companies to help with their operational needs.

Softbank and the Singapore-based Clermont Group also invested $400m in UK firm OakNorth Bank, a digital-only bank providing loans for small and medium-sized companies.

And Japan’s Mitsubishi Corporation spent $220m buying a 20% stake in UK power firm Ovo Energy.

Still, the US is by far the biggest investor in the UK’s tech sector, figures show, with USD 2 billion worth of investments so far this year.

Online food delivery businesses like Deliveroo and digital payment platforms are among the areas that caught the attention of American investors.