More than $400bn in market value has been wiped from European tech companies since the peak of the 2021 boom.

Overall, the market value of European tech companies, including the UK, fell by $400bn in 2022, from $3.1tr to $2.7tr, according to venture capital firm Atomico.

This year’s The State of European Tech 2022 report describes 2022 as a “year of two halves” because of the soaring levels of investment in technology companies at the start of the year – a continuation of the pandemic-fuelled “frenzy” of 2021 – and a drop-off in the second half as investors sit on their hands spooked by the cost-of-living crisis, soaring inflation and the war in Ukraine.

“Our view is the challenging macro will persist well into 2023,” said Tom Wehmeier, partner and head of research at Atomico. “There’s no going back, at least for a very long time, to the conditions we saw at the end of 2021.”

>See also: Earliest-stage tech start-ups being starved of investment, warns Google

Investors cool off

The total amount expected to be invested in European tech is expected to drop to $85bn this year, compared with a record $100bn deployed in 2021.

Despite the downturn, this is more than double the $38.8bn raised in 2020, which Atomico said showed how far the European tech ecosystem had developed.

In total, UK tech companies suffered a drop in investment from $36bn in 2021 to $27.9bn in 2022 — still three times the level of tech investment into the second-largest recipient, Germany ($10.8bn).

London remained the most attractive European hub for tech investment capital, with $19.2bn of financing, followed by Paris with $9.9 billion.

>See also: Number of new venture capital firms drops by two thirds in 2021

Unicorns hobbled

And the number of “unicorns” being created – tech start-ups valued at more than $1bn – fell by more than two-thirds last year. More than 100 unicorns were minted in 2021 but the figure has fallen to 31 so far this year – the lowest level since 2017, excluding the coronavirus pandemic year of 2020.

The UK and Ireland are still the grazing ground of the highest number of unicorns, with 118 firms valued at more than $1bn each, followed by Germany, Austria and Switzerland, which collectively have 77 between them.

Huge redundancies

Over 14,000 tech employees of European headquartered companies have been made redundant over the past year, said the report.

However, the total number of layoffs in European tech companies is actually much higher than the 14,000 figure suggests, as the data was culled from company announcements as to numbers for redundancies. Many redundancy announcements do not specify how many people are being shed.

The pace of tech staff being made redundant globally accelerated rapidly in the second half of 2022. Globally, more than 200,000 tech workers lost their jobs in the past year at more than 1,000 companies.

Yet 11 million more IT specialists will be need to meet Europe’s needs for tech by 2030, according to the European Commission. This would mean more than doubling Europe’s existing nine million IT workforce in Europe.

Further reading

UK tech investment accounts for one third of £76bn invested in Europe