Is the UK's tech sector on the right trajectory?
Technology, throughout history, has transformed our lives and has played the role of a catalyst of change. Britain has always had an entrepreneurial spirit at its heart and has had a long love affair with tech. In its broadest terms, technology, science and innovation have been core priorities for Britain for centuries, but it’s only in the last decade that Britain’s digital tech sector has come to the fore. The rapid rise of technology in the 21st century is changing the game in almost every sector of the economy. With every exciting new technological innovation, there’s a load of legal wrangling to work out. “The digital market has exploded,” says Bristows training partner Miranda Cass. Despite a difficult backdrop with the end of the Brexit transition period, social distancing, and multiple lockdowns brought on by the pandemic, the tech sector has proven resilient by managing to grow despite the unprecedented circumstances.
The UK tech sector is booming. New figures released by the government’s Digital Economy Council show that the industry grew by 1000% between 2010 and 2020. One key element of tech industry growth has been the increasing availability of venture capital funds, going from £1.2bn in 2010 to £11.3bn last year, higher than France and Germany combined. Growth in venture capital investment has increased by over 40% for the third year in a row. In 2019, the UK tech sector grew 6x faster than the wider national economy, outstripping the US and China to lead global growth. UK deep tech investment rose by 17% in 2020, the highest rate of growth globally. The tech industry is expanding more than two and half times faster than the rest of the British economy, with a reported 2.1 million jobs created in the digital economy in 2018. The UK digital sector is said to have added £149bn or £400m a day into the country’s economy in 2018, an increase of 7.9% from the year before. The UK is more attractive to international investors than ever; 63% of investment into UK tech came from overseas in 2020, up from 50% in 2016. The majority of the money coming into UK tech is from the US, with 37% of all funding coming from the States, up from 31.5% last year, with the majority of it going into fintech and health tech companies. Over 28% of UK venture funding came from domestic capital. The UK tech startup and scaleup ecosystem is valued at $585bn – 120% more than in 2017, and more than double the next most valuable ecosystem, Germany, at $291bn.
London now ranks fourth behind the Bay Area, Beijing and New York in terms of the number of start-ups and unicorns created. While eight billion-dollar companies or unicorns were created in the UK in 2019 – taking the total number based in the UK to 77 – the amount being invested in early-stage companies increased, reaching £3.9bn in 2019 up from £3bn the year before. Since 2010, the number of British unicorns has grown from 8 to 91, while the number of companies nearing unicorn status has also grown 10-fold. It now has over 96 ‘unicorns’ (private companies valued at over $1bn), collectively worth £333bn, compared with just eight in 2010. Britain is also home to 139 more potential unicorns, valued at least $250m each, a third of Europe’s total.
During the same period, the UK produced sales, IPOs and mergers worth USD 40 billion (£31.5 billion), placing it higher than every other country in Europe. This is no one-off: the UK has consistently placed as the biggest source of successful company exits in Europe for the past five years, worth a total of USD 119 billion in 2013. Emerging tech trends included an increase in the prominence of edtech, CreatTech, health tech, and climate and agricultural tech. Future areas of tech sector growth included Mobility Tech, TravelTech, FoodTech, InsurTech, and continued prioritisation of investment in tech innovation.
Record investment in tech
The UK’s technology industry is worth $1 trillion after a surge of growth throughout the pandemic. Dealroom figures suggest the tech sector doubled in value in 2020 to $942 billion and continued to see growth in both private and public markets throughout 2021. It is the tech industry that has chosen the UK, rather than the other way round. The UK’s trusted institutions and legal frameworks, its strong economic fundamentals, its access to global capital markets, and its open and creative culture have created an ecosystem ripe for tech development.
The rapid rise in value for the UK tech sector can be, in a large part, attributed to a wave of tech adoption ranging from digital health apps, to education platforms, video conferencing and e-commerce during the COVID-19 pandemic. During what was the tech sector’s best year since 2014, some £29.4bn was raised by start-ups and scale-ups, according to figures prepared for the government’s Digital Economy Council. The figures suggest that the UK has seen an especially impressive rise compared to other countries, with its latest valuation more than double that of Germany and five times larger than France, according to Dealroom. The US and China are the only other countries that can claim $1 trillion valuations for their respective tech industries. Valued at less than $500bn in 2018, the UK tech sector has more than doubled its worth in just three years.
Effect of Covid-19 on the tech sector
The pandemic was a harrowing blow to businesses, with 72% of firms relying on government support to survive through lockdowns, according to a survey we carried out with the Confederation of British Industry (CBI) which has been published by the Centre for Economic Performance (CEP).
When the pandemic forced swathes of the global workforce to leave their office buildings indefinitely in March 2020, long-term remote working capabilities were collectively and efficiently mastered almost overnight. While the overall effect of coronavirus on the British economy was undoubtedly negative, many tech companies benefited enormously from the market shifts that occurred and resulting in increased tech demand from both consumers and businesses. The pandemic spurred three-quarters of firms to adopt new technologies, and businesses are keen to continue with this innovation mindset, which could be harnessed to fulfil the UK’s net zero commitments. According to a UK Tech News survey, almost half (47%) of UK tech businesses pivoted their offering in some way between March and August 2020. Of those who pivoted, 61% plan to stick with their new approach after the pandemic subsides. Remote living has seen demand soar for e-commerce, cloud infrastructure, security software, EdTech, and many more digital services. A recent McKinsey survey of executives revealed that since the pandemic, businesses have brought forward the planned digitisation of their operations by an average of three to four years.
In the legal sector:
Technology is transforming the way legal transactions are carried out in the UK. As the space for digital-led innovation grows, legal technology is growing in demand thanks to its ability to simplify complex or time consuming legal tasks including processing legal documents, signing contracts and even raising legal fees.
From computer automation taking on administrative tasks such as filing and invoicing to advances in artificial intelligence that streamline client intake and provide information on legal options, technology continues to transform the legal field. In the last few years, the legal industry has seen immense change and emerging areas such as legal technology and legal operations have seen unprecedented growth. Whether we’re talking about clients of a law firm or the internal clients of an enterprise, neither will continue to accept work on the same basis as they did ten years ago. It is not only a question of billable hours but efficiency. The role of a junior lawyer might change from administrative tasks to operating and interpreting results from legal tech software. As we have seen over the last five years or so, many administrative tasks have become automated and there is no reason to expect that this won’t continue. This could prove to be a big factor in making the law firm much more efficient.
The main driving force behind the adoption of legal tech by law firms has been the promise of higher profits through automation of routine tasks, and the resulting efficiency gains. Legal Tech companies are often startups founded to disrupt the traditionally conservative legal market. Legal technologies enable the development of new business and delivery models, and they provide enough incentives to clients and knowledge to lawyers, for the adoption of alternative legal services. The use of tools for law or legal research is now very common within the legal field. Commercial companies offer services where a lawyer can pay to search case law, contracts, and practice guidelines. In some countries, case law can be accessed for free using the internet.
The Investors’ tepid interest in software for law offices during the early years of this decade was likely attributable to a variety of factors, among them the legal industry’s slow adoption rate for new technology, the industry’s notoriously long sales cycle, and investors’ lack of familiarity with the industry. Most law firms have transitioned to using legal practice softwares these days. Law practice management software is one of these legal softwares which is designed to manage a law firm’s case and client records, billing and bookkeeping, schedules and appointments, deadlines, computer files and to facilitate any compliance requirements such as with document retention policies and courts’ electronic filing systems. 
As the years have passed on, the software for legal work has gotten better and better. Research by Intapp has submitted that not enough UK Law firms are deploying new technologies. The report found that fewer than 50% of law firms in the UK were using automation tools. The study – Shaping the Future of Law – shows that serving unmet demand from small and medium-sized businesses (SMEs) and consumers could be worth up to £11.4bn in annual revenues, while also enabling £8.6bn in cost savings for SMEs every year. Around 200 legal tech businesses in the UK have attracted £674m in investment as of December 2020 and employ more than 7000 people, with these figures predicted to rise to £2.2bn annual investment and 12,500 jobs by 2026. Attitudes to legal technology solutions have changed in UK financial institutions since 2018. Back then, while there was some enthusiasm over what the future of legal technology could offer, there was also scepticism from some about its potential impact.
In legal technology, it was half a decade of tumult and upheaval, bringing changes that will forever transform the practice of law and the delivery of legal services. Due to the sudden rise of the Covid-19, law firms have not been immune, with clients reducing their business activity. Tools that support remote work and virtual collaboration have undoubtedly become crucial for business continuity and client service. It is no surprise that law firms plan to continue to invest in legal technology. A recent research report for law firms estimates a revenue decline of 15-20% in 2020 compared to the previous year which will have an even greater impact on profitability, driving many law firms to the difficult decision of freezing costs and in some cases taking more drastic measures such as reducing staff hours and cancelling partner pay-outs.
Within the next few years, the Software for the legal sector will become a lot cheaper and simpler and will be time-efficient for the lawyers and the clients alike. With Legal software tools implemented in the law firm, a high level of analysis can be done in a few minutes (e.g., fast calculation, advanced reports, management of cases turnover, caseloads control, document management, etc.). In the near future, we may be able to witness the staff of the law firms specialising in their own skill sets and business models which might be different from other lawyers. Lawyers decide to move up the ladder and “specialise” or move down the ladder and “commoditise”.