Rise in UK Tech Exports: Will the Rally in Tech Stocks continue?

Summary

• The UK become the fifth-largest exporter of tech services in the world at a valuation of £23.3 billion in 2019
• UK’s digital technology trade surplus has shot up by 69 per cent in the last four years
• The country witnessed a 55 per cent trade surplus in 2019, which is higher than the standard international trade surplus of 48 per cent

As they say, technology is a new force that drives the economies and changes constantly with innovations and concepts. Not only the developed nations have seen the technological transformations across the industries, but the emerging economies have also undergone a paradigm shift with the use of technology.

Talking about developed countries and technological adoption, the UK has become the fifth-largest exporter of technology services in the world at a valuation of £23.3 billion in 2019, just behind India, the United States, China and Germany, according to a report published by UK’s network for ambitious tech entrepreneurs, Tech Nation.

The report shows that the share of export by the UK tech services is far bigger than their import. The country witnessed a 55 per cent trade surplus in 2019, which is higher than the standard international trade surplus of 48 per cent. The country’s digital technology trade surplus shot up by 68 per cent in the last over four years (£8.7 billion in 2015 to £12.8 billion in 2019). With this, the UK’s tech sector is now just behind the country’s insurance and financial services industries, which are at £16.9 billion and £43.4 billion, respectively.

Interestingly, the surplus has mostly come from the growing number of high-tech export firms in the UK, which are around 7,500 in size. The UK’s digital technology services have seen a rise from 2015, with the country witnessing the biggest jump in 2018.

Scope for Boosting the Growth Potential for UK Tech Services

Going further, the country has tremendous scope to expand its technology services offerings across the globe. The country ranks third concerning the number of UK tech unicorns and tops the list in Europe for the same. If we take this into considering, there is a demand and room for tech companies in the UK to scale up new heights. The country already has well-established technology companies that are offering domestic tech services, and by further enhancing the high-tech offerings, the country can turn out to be an emerging technological solutions hub.

The Tech Nation’s other report titled “Global Opportunities Index” outlines the top 25 most attractive destinations for business. It highlights that the UK stands at 2^nd rank in the world for digital technology trading prospects. This is mainly pushed by the UK’s total digital retail and e-commerce sales which reached £688.4 billion in 2018, beating France’s £82 billion.

If we consider details provided in the report, UK tech firms, Brazil and Singapore seem to be the fastest emerging global prospects for trade.

Another area that scores well for the UK to expand its digital technology offering is targeting the right market. In 2019, the US was the largest importer of technology services, with a valuation of about £34 billion. The second and third biggest importers were Germany and China, with a valuation of £33 billion and £21 billion, respectively.

Going by the mentioned statistics and scope it offers, the UK government and other relevant institutions in the country can bring an impetus to the nation’s technological sector, especially after nullifying the effect of the coronavirus pandemic and the permanent solution of Brexit. Furthermore, it is forecasted that the UK’s digital tech sector will likely see another 35 per cent growth by 2025, which would add nearly about £8.15 billion, taking the country’s total technology exports to £31.45 billion.

What Investors Can Take Home Amid Growing Prospects of UK’s Tech Sector

If we look ahead, the UK tech sector certainly offers massive prospects for investors who are keen to explore tech firms in terms of capital infusion or buying technology stocks. Talking about the investment prospects in the UK tech stock market, it is worth mentioning that there has been a steady growth in tech stocks this year so far, even though the market has been volatile in the backdrop of coronavirus pandemic. Giving an opportunity to investors of tech stocks considering their ability to turn out to be a cash cow.

For instance, if we look at the British software firm Blue Prism Group PLC, the company’s stock has performed well in 2020. The stock slipped to GBX 850 on 19 March due to pandemic; however, it shot up to GBX 1,586 on 28 August 2020 and was trading at GBX 1,466 on 18 September 2020.

The spike in tech stock price is not the case with the well-established firms alone, but even the small-cap companies have also seen a good rise in its price. For instance, the UK’s software development firm Dev Clever Holdings PLC, whose stock price was trading at GBX 1.15 on 9 January, has touched GBX 9.75 on 28 July and was trading at GBX 8.55 on 18 September 2020.

If we consider the present scenario and the scope and target regions, the UK tech firms look set to focus more on the technological advancement in terms of offerings and grabbing a big share in the global tech sector. The technology sector may see a complete makeover in a couple of years, with UK tech companies changing business models and exploring the tech platform extensively.