Britain’s fledgling electric vehicle industry seems to have run out of juice – but we shouldn’t be too hasty in writing off our entire tech sector.
Lunaz, backed by football legend David Beckham, this month put its commercial transport arm Lunaz Applied Technologies into administration after production setbacks. It will now focus on passenger cars. The company had been valued at more than £150m in a 2022 funding round. Arrival, the troubled electric to secure rescue funding. Its one-time market value of £4.2bn had slumped to just £20m. Essex’s Tevva Motors has struggled to raise further capital, while electric truck maker Volta – Swedish but based in the West Midlands – collapsed in October after its battery supplier folded.
The valuation issue is key here. Arrival was one of a wave of electric vehicle companies that capitalised on huge investor demand during the last tech boom to raise money at valuations in the billions. It might be argued that a good proportion of tech investors, particularly those aged under 50, are fair-weather punters whose careers may have been built (and sometimes fortunes made) against a generally benign economic environment. But their investee companies face a higher cost of capital for the foreseeable future and those whose business models have relied on artificially low interest rates face tough times ahead.
Valuations are also problematic: those of private equity and venture capital investors in tech have only gone one way, unhindered by wider economic woes and, in some cases, lack of near-term returns. For those businesses requiring bank debt, lenders’ margins over central bank rates have widened, so options for funding investment and growth have shrunk.
That said, the long term picture for UK tech remains very positive. As home to eight of the world’s top 50 universities, companies can access a healthy pool of skilled talent, and research and development programmes. There is no shortage of software engineers on these shores. Success in starting, scaling and selling UK businesses has been proven. London’s Silicon Roundabout, Canary Wharf’s Level 39 and other major cities, notably Bristol, Cambridge, Manchester and Cardiff, have produced several impressive tech and engineering start-ups, many of which have already been snapped up by large US or Asian corporates.
UK growth companies need to be nimble and ready to take quick action if they want to secure their longevity, which means being prepared on a number of fronts:
- Data-ready for fundraising – financial content for Information Memoranda
- Efficient structures for founders and directors
- Support for tech grant applications
- Assisting in communications and negotiations with lenders
- Advice on R&D allowances
- Recognition of complex revenues
- Treatment of Intellectual Property and intangible assets
- Advice on structuring strategic alliances and major contracts
- Scaling strategies
- Due diligence on potential transactions
These don’t just apply to first-timers. Successful tech businesses are resilient and able to ‘pivot’ or reinvent themselves in a global industry with seemingly endless possibility and diversity – internet security, Software as a Service, (SaaS), Platform as a Service (PaaS), carbon-ion batteries, trading platforms, e-commerce and telecoms solutions, to name just a few that we have worked with at Buchler Phillips. Tech entrepreneurs looking to steady their businesses while funding waters remain choppy are welcome to get in touch for an exploratory discussion.
Written by David Buchler, Chairman at Buchler Phillips, UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.