There are a few high-potential new markets for New Zealand tech scale-ups to consider - so why do so many not choose the UK? The UK is a high-opportunity environment with many similarities to NZ and with far greater opportunities for scaling revenues, securing funding and hiring the best team to support your international growth.

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In this blog, we will inform you about all things UK expansion - including its size, funding environment, available talent, and opportunities and give you current, relevant information on how to enter the UK market successfully.

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Why should NZ-based tech scale-ups choose the UK right now? 

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There has been increasing rumours of an impending recession in the UK for quite some time now. However, rather encouragingly, the macro data doesn’t yet support this narrative.

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Right now there are ample opportunities for NZ-based tech businesses to scale successfully into the UK using a targeted approach that’s backed by thorough data and analysis. The UK is projected to occupy the sixth position globally in 2050 - it’s a stable, high-opportunity environment with an aligned business landscape to Australia and New Zealand, especially after the FTA’s agreed recently.

As Joseph Nelson, Trade Commissioner for the UK and Ireland at NZTE, said: "The FTA's investment provisions incorporate modern protections similar to other recent FTAs, providing certainty for investors from both countries. This will create conditions for further growth in two-way investment."

In a recent webinar with Kiwi SaaS, Nelson also noted using trade data: "The UK is an important services market for NZ. In the year to March 2020, NZ exported $1.67 billion in services to the UK and imported $1.18 billion."

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Some of the benefits of scaling to the UK include market familiarity, advanced tech consumer & business usage, a highly evolved business environment and a fantastic talent pool of both local and international staff. It’s also worth remembering that UK GDP was 2.23 trillion in 2022 and it’s the fifth-largest global economy behind the United States, China, Japan and Germany. The UK is a key stepping stone in your global expansion strategy, allowing many NZ companies to enter EMEA and North America with greater confidence.

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However, there are also some significant downsides to consider - particularly, how competitive the market is for international tech businesses, the cost of doing business in the UK, the cost of living in the UK and how highly regulated the market is. These costs tend to be lower than the US in terms of salaries and the cost of working in a single market vs 50 markets in the US.

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Jenene Crossan is the CEO of Powered By Flossie, an innovative NZ-based technology company that provides solutions for multinational hair and beauty product brands. On the topic of Flossie’s UK expansion, she said “For Flossie, the UK has been an obvious global expansion pathway. With many similarities in culture and a friendly existing national relationship, we could easily get introductions to peer networks and establish ourselves relatively smoothly.

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“A willingness to assist and be helpful exists naturally within the British and typically they love to ‘meet a kiwi’ (our reputation is strong and well-considered). We are considered progressive, interesting and innovative and we found that helped pave the way for meetings (which we were able to turn into second meetings or further introductions). 

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“Like anywhere, it requires persistence, patience and a willingness to put yourself out there.  The opportunity is there for the taking by the globally ambitious entrepreneur”. 

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Access to capital in the UK

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The UK invests heavily in its tech companies, making it a landscape that’s primed for growth. VC investment into UK tech was over $41 billion in 2021, dipping to $30bn in 2022 in the face of global investment pullback but still a viable place to raise capital.

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The UK is home to 4,595 venture funds and 1,650 VCs, compared to 16 venture funds in NZ, making it a huge potential source of capital. UK tech companies were third globally for tech investment in 2022 behind only China and the US.

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There are also many business Angel investors in the UK such as EIS and SEIS funding schemes which many companies from NZ can access with the right advice. UK Grant funding peaked in 2020 with 3,945 grants issued and over the last year, 1,816 grants of at least £100,000 were given to UK-based businesses.

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The UK government grant funding exceeded £1.1bn and has remained strong with over £750mn provided in 2022, making the UK an excellent landscape to source capital successfully.

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Access to tech talent in the UK

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We know that hiring great people is one of the key pillars to successfully enter a new market. The UK is home to a diverse, high-calibre tech workforce - providing the talent you need to grow. The UK houses 17 of the top 100 universities in the UK and has experienced professionals with a track record of leading high-growth tech companies. 

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There are many tech hubs in the UK, many of which are based outside of London. Edinburgh is a fantastic tech hub for informatics, fintech and data. Oxford and Cambridge are great for deep tech, quantum and AI. London is known for fintech, insurtech and healthtech hubs.

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Government support

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The UK government is committed to supporting the growth of NZ tech companies and does this in a number of ways. Various visas are in place to make it easier for NZ-based businesses to expand into the UK and for international staff and founders to make a home there. 

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Four of the key ways that the UK supports NZ tech businesses who wish to expand to the UK are: 

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• Transparent and simple licensing and authorisation procedures.
• Data flow security and protection without localisation or source code transfer requirements.
• Commitment to promoting low-carbon services and cleantech.
• Reduction of specific performance
requirements, lowering costs, granting investors greater authority, and reducing market distortions

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SMEs with fewer than 500 staff and turnover of under €100 million benefit from R&D tax relief. If the company is loss-making, it can claim a tax credit worth up to 10% of the surrenderable loss. If the business is ‘R&D intensive’, that number is 14.5%. 

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Profitable companies can deduct 100% of R&D costs that affect their profit margin. On top of that, they get an extra deduction of 86% of R&D spend. E.g, if you spend £50k on R&D the tax deduction would be £93k (180% of £50k)

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Also a host of policy and growth-focused organisations help NZ companies get the most from trading in the UK including TechUK, ScaleUp Institute, COADEC, Catapult and Innovate UK.

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Interested in scaling internationally to the UK?

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The UK is a fantastic market to consider right now if you’re an ambitious NZ-based tech business that is ready to expand to new markets. However, to navigate the market successfully it can be hugely beneficial to have expert knowledge and guidance.

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As a UK-based Kiwi, our Founder Peter Gillingwater understands the unique complexities that NZ-based tech scale-ups face when it comes to expanding into the UK. As a team, we’ve helped many to successfully scale, by focusing on robust research, high-quality data, and finding the right talent to accelerate and support your growth in the UK.

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If you’re interested in working with us, please get in touch at peter.gillingwater@newfound.global.

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