Over 1,000 tech start-ups have gone bust since lockdown

Sharp acceleration in number of high-growth businesses filing for bankruptcy as short-term effects of government Covid-19 support wear off.

Over 1,000 of the UK’s high-growth tech start-ups have gone bust since lockdown began.

The crisis accelerated in September, which recorded the highest volume of tech start-ups – businesses which the government has banked on to lead Britain out of the coronavirus crisis – going out of business in 10 years.

The sharp rise in the number of start-ups that have gone bust highlights the fading preservative effects of government business support schemes such as the Future Fund as Covid-19 rips through the tech sector.

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In fact, 273 fast-growth companies filed for administration, liquidation or dissolution in September, out of a total of 1,067 since the beginning of lockdown – a 181 per cent month-on-month increase compared with August, according to research by Plexal and Beauhurst.

What’s even more worrying is that the collapse of tech start-ups is happening even before the government’s emergency Covid-19 business support schemes are withdrawn completely in November.

London and Scotland have born the brunt of business failures.

As many as 388 high-growth companies based in London have filed for administration, liquidation and dissolution since the start of April, with numbers increasing from 30 to 95 between August and September (a 217 per cent rise).

Meanwhile, 48 Scottish start-ups filed in September, almost half (49 per cent) of the total filings since the start of April (97).

Investment down 18% year on year

However, the UK’s high-growth start-ups have raised £5.4bn since the UK went into lockdown on March 23 – down by 18 per cent compared with the same period in 2019.

But only £458m of this was raised by start-ups raising investment for the first time, representing a 55 per cent year-on-year drop in first-time funding.

Investors are keeping their powder dry for investment in later, safer funding rounds.

Andrew Roughan, managing director of co-working space Plexal, said: “We are now starting to see the pent-up effect of the pandemic on UK businesses – in particular, early stage start-ups. We are only now starting to see more severe damage to UK start-ups that puts the survival of an entire generation of innovative companies at risk.”

Henry Whorwood, head of research and consultancy at Beauhurst, said: “We have never seen a month with so many start-up deaths as we did in September. The coming months could be crucial for the future of the UK start-up community.”

Further reading

25 of the most exciting fast growing technology companies in the UK

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Early Stage Funding