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UK immersive tech sector stands poised for explosive growth

Author: ICAEW Insights

Published: 11 Jun 2021

A new overview of the UK’s immersive technology scene has highlighted the potential for exponential growth and appetite for investment in the sector.

The UK immersive tech (XR) sector, which includes virtual reality (VR), augmented reality (AR) and haptic technology, is poised for explosive growth as start-ups enter the scale-up stage of their evolution and major industry players complete acquisitions to solidify their long-term immersive tech strategies. 

An overview of the sector published by Immerse UK and HTC VIVE X highlights its huge potential and the breadth of talent that exists in the UK. Almost two-thirds of investors surveyed for the UK Immersive Tech: VC Investment Report said they expected investment in XR to increase in the coming year with a third of respondents saying that the pandemic had increased their appetite for investment.

Immerse UK is a network of government agencies (including Innovate UK and the KTN), multinational companies, major universities, technologists, creative institutions and advisers. Shaun Beaney from ICAEW’s Corporate Finance Faculty and Chair of Immerse UK’s Access to Finance Working Group co-authored the report with Asha Easton, Dave Haynes and Charlotte Thompson.

“Like a lot of technologies, there has been a hype cycle. A lot of people associate things like VR with video games and entertainment and AR with apps on their phones but increasingly these technologies are being used across all sectors of the economy,” Beaney said. 

The report features profiles of 31 of the UK’s fastest-growing and innovative XR companies working across sectors as diverse as manufacturing, life sciences, criminal justice, civil engineering and education & training. Its objective is to inspire more investors to get involved in the sector and to help XR start-ups on their own investment journeys.

Back in 2019, PwC’s Seeing Is Believing report forecasted that VR and AR alone have the potential to add $1.5 trillion to the global economy by 2030 including a predicted $69.3bn boost to the UK economy and over 400,000 new UK jobs. However, despite the huge growth potential, almost all the founders interviewed for the report cited raising the required venture capital as a key challenge. 

Last month’s $500m acquisition by Snap of Didcot-based AR displays developer WaveOptics has refocused the minds of many entrepreneurs and investors in the space and may be a sign that similar M&A deals are on the horizon, the report suggests.

Although London dominates the UK’s tech investment sector, the immersive ventures featured in the report come from various regions across England, Scotland, Wales, and Northern Ireland. Together they already employ nearly 1,000 people around the world and have between them raised over £135m often by combining commercial investment such as crowdfunding, business angels and institutional venture capital with public funding including Innovate UK grants through programs like Audience of the Future. 

“A lot of early-stage investment tends to go to things that are immediately ready to go to market, typically software can be scaled globally,” Beaney explained. “Those companies that are developing deeper technology can find it much more difficult to raise money because they’re capital intensive and doing R&D over several years, sometimes even decades, and the risk profile is not one that typically suits a traditional venture capitalist. They tend to rely more heavily on government support, including through Innovate UK, to turn R&D into commercial applications.” 

Read the full report: UK Immersive Tech: VC Investment Report

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