Funding for UK defence tech companies dropped more sharply compared to overall tech investment, new research has found.
In 2023, the number of completed defence tech deals fell by 75% compared to the year before and the amount invested fell by 22%, according to data from Beauhurst and national security-focused VC firm MD One.
UK defence tech companies collectively raised £76.3m across 43 deals in 2023.
Across tech as a whole, the number of funding deals dropped by 36% year-over-year. The drop in defence tech funding brings it back to pre-pandemic levels. The report notes that the drop is sharper due to a large outlier round in 2022.
The data paints a different picture from a growing sentiment that defence tech is less of a taboo for investors following the war in Ukraine.
Despite the slowdown in equity funding, it was the second-highest amount of grant funding for defence tech companies ever.
From robotics to cybsersecurity, there are 313 active, high-growth defence tech companies in the UK, Beauhurst notes.
Notable defence tech companies include advanced manufacturing firm Materials Nexus, aerospace business Greenjets, and cybersecurity firm Lab 1.
The report noted that dual-use sectors – where other sectors overlap with defence – was more resilient.
“Equity investment into the isolated cohort of pure ‘defence technology’ companies leaves much to be desired, with 2023 investment failing to live up to the extraordinary levels we witnessed in 2022,” said Will McManners, founder and managing partner at MD One.
“However, investment in the broader dual-use sectors has been more resilient, justifying our stance that dual-use sectors provide more promising opportunities for investors over straightforward defence tech.”
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