Want to grow? Here's where tech companies should export to

The UK tech industry has steered its way through the challenges posed by Brexit, securing its position as a frontrunner in European technology. According to Tech Nation, the sector is home to 171 unicorns and has a market valuation of $1.1 trillion. London’s tech ecosystem now ranks second only to Silicon Valley, positioning the city as a global nexus for services, investment, and talent.

With this new pre-eminence, the UK's tech sector wields significant international influence. It has become a favoured destination for American venture capital, with British tech firms like Revolut, Deliveroo, and Checkout.com extending their operations into markets such as Kuwait, Singapore, and Pakistan.

The quest for new opportunities and markets beyond Europe is more crucial than ever for the UK tech sector. UK startups and tech firms need to permeate the global market to secure their future market share. However, the evidence suggests that UK tech companies tend to favour established markets over new, untapped ones.‍

Breaking Away from Traditional Market Biases‍

Historically, UK tech firms have been conservative in market expansion. In 2021, the primary destinations for UK digital exports were the United States, Germany, Ireland, the Netherlands, and France, reflecting broader economic patterns of trading with close and familiar partners.

UK officialdom is now trying to encourage the private sector to buck this path dependency. The UK government's 2023 International Technology Strategy advocated for investment in emerging economies to address the global digital divide.‍

Key Drivers of International Growth‍

There are a few factors propelling UK tech companies’ global expansion plans. One crucial driver is access to talent. By venturing into international markets, firms can tap into diverse talent pools, especially in countries renowned for their robust STEM education systems and a wealth of skilled professionals.

Another significant factor is market diversification. Expanding into new regions allows companies to mitigate risk and lessen their reliance on any single economic zone, thereby stabilising revenue streams. Investment opportunities in emerging markets also present attractive prospects for high-growth potential.

Expanding into innovation hubs within key regional markets also enables tech companies to enhance their geopolitical positioning. For instance, the Kingdom of Saudi Arabia, which established four special economic zones in April 2023, is trying to take advantage of its strategic position as a gateway to the Middle East, North Africa and Asia to persuade companies to make it their central MENA hub.

Leading Emerging Markets for UK Tech Expansion‍

UK startups are beginning to heed the call to explore emerging markets. As tech ecosystems flourish in these regions, British firms are increasingly investing and recruiting talent beyond Western borders. Simultaneously, investors from frontier economies are making their presence felt within London's tech scene. Here are some top emerging destinations for UK tech:‍

India‍

India is growing prominence as a tech startup powerhouse and stands out as a crucial ally for UK tech. The number of unicorns in Mumbai has surged from six to 15, driving a 57% increase in Ecosystem Value. Many London-based startups also depend heavily on Indian talent. The UK-India Tech Partnership, initiated in 2018, spans several Indian cities, facilitating smoother transitions for tech professionals. Additionally, the UK-India Young Professionals Scheme has made it easier for Indian workers to enter the UK. With India's venture capital ecosystem expected to reach $3.5 billion next year, UK startups are well-positioned to capitalise on this burgeoning market.‍

Brazil‍

Brazil is rapidly becoming a regional tech heavyweight, bolstered by significant government investments in sectors like biotechnology and semiconductors. The UK has actively participated in Brazil’s digital transformation since 2018 through programs like the UK-Brazil Tech Hub and the Digital Access Programme. These initiatives have paved the way for robust collaboration between British and Brazilian startups, particularly in telecommunications and information services. The Double Taxation Agreement further streamlines business operations, making Brazil an appealing prospect for UK tech firms.‍

Indonesia‍

Indonesia, the third-fastest growing economy within the G20, presents substantial opportunities for UK tech. Its youthful, tech-oriented population fuels rapid digital advancement. The UK-Indonesia Tech Hub and Jakarta-based incubator Endeavour have nurtured successful startups, and the UK government is actively engaging Indonesian skilled workers. With ASEAN's digital economy nearing $1 trillion, Indonesia emerges as a strategic gateway for Western enterprises.‍

Ukraine‍

Despite ongoing conflicts, Ukraine's startup ecosystem remains robust. High-profile companies like GitLab and Grammarly have Ukrainian origins. Initiatives such as the UK Ukraine TechBridge offer seed funding and skill development, bolstering Ukrainian startups' resilience and growth potential. While formal expansion into Ukraine is probably too risky for most right now, continued collaboration offers rewards from both a moral and business perspective.‍

South Africa‍

South Africa's robust infrastructure makes it an attractive destination for UK tech investment. The UK-South Africa Tech Hub plays a crucial role in supporting a variety of startups, including those in fintech and medical AI sectors.

UK tech companies are increasingly recognizing the potential in South Africa, with London-based VC firm Blenheim Chalcot and the cybersecurity firm Kocho both establishing a presence in Cape Town. Despite ongoing political instability, South Africa’s attractiveness to UK investors remains strong. The country has seen an 11% rise in internet users from 2016 to 2021, signalling promising developments in this dynamic region.‍

Tapping into Opportunities in the Global South‍

These countries represent just a fraction of the global opportunities available to UK tech firms willing to explore beyond traditional markets. Forrester predicts substantial growth in technology spending in the Asia-Pacific region by 2024. Meanwhile, Latin America's startup ecosystem has expanded by nearly 5% since 2018, and mobile technology and services now contribute 8% to Sub-Saharan Africa's GDP.

While expanding into new markets means navigating different regulatory environments and cultural norms, these are hurdles to manage rather than barriers to entry. Developing a coherent market entry strategy is essential, and early movers will gain a significant competitive edge.‍

The Future of UK Tech‍

The future of the UK's tech industry depends on its ability to adapt and venture into emerging markets. By seizing opportunities in the global south, UK startups and growth-stage firms can drive substantial growth, foster innovation, and enhance their global presence. These markets rapidly expanding digital economies and booming demand for advanced technologie should prove irresistible for fast-growing UK companies. By building on its strong starting position as a leader in areas like artificial intelligence, cybersecurity, and fintech, the UK can not only attract international investment but also forge key partnerships that amplify its competitive edge.