Due to a turbulent year for tech within the global investment ecosystem – caused mainly by rising interest rates, the energy crisis and widespread inflation – the sector has become a prominent point of discussion at this year’s DAVOS World Economic Forum. The forum denotes rapidly emerging technologies as the 4th industrial revolution (4IR), with Business Secretary, Grant Shapps setting out the government’s plan for a ‘Scale-up Britain’. Tech M&A expert, Claire Trachet, highlights investment into the sector as a crucial component in reaching recovery goals as well as achieving growth for health, education, tech and financial services.

Following a hiatus in investor confidence, as the tech recession saw the big five tech companies announce a combined market cap loss of $3.41 trillion, recent announcements from national GDP figures as well as record growth for the FTSE 100 suggest a speedier recovery than expected. An array of British tech companies have shown growth with takeaway giant Deliveroo reporting a 6% increase in Gross Transaction Value to £1.8billion in Q4 of 2022. Software group Sage shared similar reports with revenue rising by 10% to £540 million in the same period. According to a recent poll conducted by PricewaterhouseCoopers LLP, the UK has – for the first time in 26 years – become the third most important country in the world for growth thanks to the strength of its technological sectors.

Claire Trachet, CEO/Founder of business advisory Trachet, says the significant presence of the tech industry and their impressive (and expensive) installations at Davos are vitally important for the sector to regain the trust of elite investors. Trachet highlights H2 of 2023 as a potentially opportune period for players in the tech and startup sector seeking investment or an exit. Venture capital investors in the United States, for example, are sitting on a $290 billion powder pile that’s ready to set off a new wave of tech startups across the globe. Serving as testament to this, Instead of predicting a “tougher” 2023, Gita Gopinath, deputy managing director of the International Monetary Fund, now expects an “improvement” in the second half of the year and into 2024.

Trachet comments on how the UK market is defying expectations and the effect this will have on M&A and investments:

“It’s critical at this stage of economic recovery to see high profile figures like Grant Shapps instill greater confidence surrounding the resilience of the UK tech market at Davos as he presents plans for a ‘Scale-up Britain’. This demonstration of certainty and positive results will be instrumental in encouraging dealmakers and investors to resume the activity we’ve seen over the past years and pre-pandemic – adjusted to the current playing field of course.

“From what we have seen so far in 2023, it looks like there is great potential for the market to stabilise faster than expected. With the likelihood that inflation will begin to subside, this could reduce some of the uncertainty in the market that has been problematic for investors and dealmakers. Despite what many were predicting towards the end of last year, I expect the outlook to be much more positive in H2 and going into 2024 after the headwinds from last year have subsided – particularly for UK tech.

“Those that stand to win in the current climate are the startups that have become resilient and capital efficient during these challenging times. Investors are now much more focused on numbers and balance sheets rather than growth narratives.”