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Rise in Tech Startups Closing During Pandemic Despite Gov Support

David Paul

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entrepreneurs starting A Digital Business In Scotland technology startup

New research shows that a record number of startups have closed in 2020.

Technology startups in Britain are struggling to stay afloat during Covid-19, according to new data conducted by Plexal and Beauhurst.

The research indicated that more than 1000 startups have filed for administration since the start of lockdown.

A record number of these were in September, with 273 companies filing out of a total of 1,076 – a 181% month-on-month increase compared with August.

The conducted research analysed around 30,000 startups across the UK and found a record number have had financial issues since the start of the pandemic.

Although several government schemes have worked to support early-stage companies over the period, there is concern that those schemes now coming to an end will make the situation more precarious over the next few months.

The issue was felt most in the business hub of London, where data showed a total of 388 high-growth companies-based filings for administration, liquidation, and dissolution since the start of April. These numbers increased from 30 to 95 (a 217% rise) between August and September.

A similar trajectory is also being seen in Scotland, where 48 startups across the country filed in September, almost half (49%) of the total filings since the start of April (97).

Commenting on the research, Andrew Roughan, managing director of Plexal, said: “The government commendably offered a number of startups a lifeline at the peak of the crisis. But despite the slowly improving funding picture, we are now starting to see the pent-up effect of the pandemic on UK businesses – early-stage startups.

“Government support has artificially kept companies afloat and delayed the true impact. We are only now starting to see more severe damage to UK startups that puts the survival of an entire generation of innovative companies at risk.

“Government initiatives alone are not sufficient to support startups most in need of funding and cashflow in the current economic climate. It’s these businesses that will provide the innovation and jobs that will drive the UK’s economic recovery, and they need our urgent support.”

Since March lockdown, the research shows that high growth startups in the UK have raised £5.37bn in investment. This is just 18% compared to the same period in 2019.

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However, it also shows a difference between more mature companies and those at the earliest stages of development. Only £458m of the £5.37bn was raised by startups looking for first-time investment, indicating a 55% year-on-year decrease for first-time funding.

Despite this, Tech Nation chief executive Gerard Grech believes that the UK tech sector is capable of weathering the Covid-19 storm and “exiting the crisis in a stronger position”.

According to a report compiled by the firm in June, investors are still continuing to back British business despite the economic downturn.

“Many businesses are adapting and innovating to support the fight against coronavirus, demonstrating the resilience and resourcefulness of the UK tech sector,” said Grech.

“Although we are seeing many tech companies closing key rounds of funding, the picture is being monitored closely at Tech Nation, especially across different parts of the country, where access to finance may not be as strong,” he said.

David Paul

Staff Writer, DIGIT

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