2022 Sector Outlook

Technology, Media and Telecoms Sector Outlook

View our 2023 sector outlook for technology, media and telecoms

Dynamic TMT sector looks set for an exciting 2022

Ian Bain, our Industry Director for Large Corporate, Technology, Media & Telecoms, explores the outlook for the TMT sector in 2022.

High-growth tech businesses set for another record-breaking year

Industry Director LC, Lee Everson says the UK’s high-growth technology companies look set to continue to thrive in 2022, both at home and in the key US market.

Dynamic TMT sector looks set for an exciting 2022 

Knowledgeable insights on the rapidly evolving TMT sector, from our industry heads on the opportunities and challenges facing the sector in 2022.

Ian Bain expects the UK’s trailblazing tech and media companies to continue their upward trajectory of growth and success this year, despite some challenges ahead.

The TMT sector has been going from strength to strength over the past year, continuing its spectacular growth and attracting a huge amount of investment – a trend I expect to continue during 2022.

The content the media industry produces has been in great demand during the pandemic as consumers have sought relief through entertainment during the various lockdowns and restrictions, with more ways to consume content than ever before.

The exponential rise in the popularity of gaming also looks set to continue. Ever-improving tech enhancements like virtual reality (VR) and cloud gaming alongside the release of exciting, very high-quality new titles, will continue evolve the gaming experience, while the rise of mobile gaming continues to attract new and more demographically diverse audiences.

Content remains king

Of course we’ve also seen an enormous increase in demand for TV content. This has made content ever more valuable, and is driving a growth in big-budget productions funded and produced by the major streaming platforms.

With consumers rapidly adopting new ways to view content, seeking more control over when, where and how they use it, demand for ‘bespoke’ content viewing is accelerating fast.

Meanwhile traditional ‘linear’ terrestrial TV services face increasing pressure to match the financial muscle, and quality and volume of production of the major streaming platforms and will need to enhance their viewing offerings to remain relevant and retain their audiences and funding.

While Covid clearly presented practical challenges for programme makers, they’ve shown considerable ingenuity in overcoming them, through clever scripting, some heavy rewriting and filming, introducing new formats, and greater use of post-production studio technologies enabling production to proceed with fewer location shoots.

This adaptability has certainly stood the industry in good stead to continue to meet the demand for content it has created. Many streaming platforms are signalling their intent to continue heavily investing in TV production by establishing their own studios in various locations across the UK.

Larger media businesses are likely to continue looking to acquire specialist independent production companies in a drive to gain access to larger audiences by appealing to different demographics.

At the same time, media advertising spend will continue to swing towards more targeted digital options reflecting changing viewing habits, with digitally-focused, niche advertising businesses continually springing up to help advertisers get more bang for their buck.

Data, data everywhere

Tech businesses too have seen a wave of new investment, in the absence of opportunities in other industries badly hit by Covid.

We’re seeing digital native businesses disrupting virtually every business sector, as we’re witnessing in the banking world, for example.

Alongside the more established tech companies, the digital natives will continue to drive the digital transformation that embraces everything from cloud-based technologies, to advances in AI, machine learning and robotics, to the expansion of the 5G network and the internet of things (IOT).

Unlocking the full potential of these game-changing technologies will require virtually every business to fully get to grips with harnessing the power of data, creating yet more opportunities for the tech sector.

However, society’s growing dependence on the combination of complex digital technology and data analytics carries inherent risk, with the potential for a catastrophically compromised internet to shut down entire payment systems for example. Meanwhile personal and commercial data is more vulnerable than ever to theft and criminal exploitation.

Indeed, disruptive, data-focused cyber-attacks are becoming more frequent, and not only executed by criminals but increasingly by hostile states jostling with each other against a backdrop of growing geo-political instability and the deployment of tech as a weapon of digital imperialism.

Clearly, the ability to identify cyber risk and deploy effective security measures is going to be more critical for all organisations as they look to protect and secure the integrity of their digital assets, commercial and client data.

Similarly, the big tech companies will need to demonstrate great diligence and moral oversight around access to personal data if they are to avoid reputational damage and financial sanctions – such as the €223m fine WhatsApp apparently received last year from the Irish Data Protection Commission for privacy breaches.

Positive outlook despite operational challenges

The already high demand for staff with the relevant technical expertise looks set to intensify, and its likely tech businesses will continue to face talent shortages this year.

Additionally, the much-reported global dearth of microchips presents potentially severe challenges to many tech companies, although hopefully this threat will recede as the post-pandemic recovery gathers pace.

And in response to the growing influence of environmental, social and governance (ESG) issues, tech companies will need to recruit the right people and invest in effective strategies and programmes to deliver on their sustainability goals and demonstrate their green credentials to increasingly sceptical stakeholders.

Meanwhile, tech businesses will no doubt continue to develop products and services that are almost unimaginable today – and that will make the current excitement over things like driverless vehicles and Mobility as a Service (MaaS) seem like a thing of the past.

I think it’s safe to say that, although it certainly has some issues to overcome, the TMT sector as a whole can expect to see some amazing and continued opportunities and growth in the year ahead.

High-growth tech businesses set for another record-breaking year

Lee Everson, Industry Director – Digital, believes UK tech companies will continue to capitalise on the disruptive trends that are transforming the way we live and work.

Record investment

2021 was a record year for venture capital investment in UK high-growth tech businesses. Rocketing valuations have prompted some to talk about a ‘bubble’, but while average valuations could certainly be argued to be ‘toppy’, I think the huge investment into these businesses simply reflects the fact that the structural trends underpinning their success have never been stronger.

Covid may have first emerged in 2020, but it was 2021 when we really saw evidence of the degree to which the pandemic has accelerated the transition to digital – of which the daily Zoom calls that so many of us have experienced is just the tip of the iceberg. Secondly, the year brought a new level of global consciousness about the societal and climate challenges we face, with the world increasingly looking to technology to provide answers.

2021 was also a year that saw UK-founded businesses really making waves overseas, particularly in the key US market, with a few headline examples including high-growth cybersecurity business Immersive Labs making a US acquisition and online car retailer Cazoo and digital health service Babylon Health going public in the US via SPACs.

While some tech firms have employed SPACs to list in the US (which has undoubtedly seen the London Stock Exchange losing out), I’m sure the capital and experience will be recycled into new UK start-ups, helping to maintain the UK’s place as a hotbed of high-growth tech. Plus, 2021 saw reforms which should also help to bolster London’s attractiveness as a place for future tech listings. Given that many tech companies are also attracted to the US because of its bigger market opportunity, time will tell as to how competitive London can be for the largest deals.

A world of opportunities

Looking ahead, against a backdrop of continuing climate concern and the ongoing digital revolution affecting almost every imaginable aspect of our lives and work, I see continued tech disruption fostering high-growth opportunities across a range of sectors.

With the built environment accounting for a huge share of global carbon emissions, I think we’ll see continued growth and investment in the proptech field, with new technologies being developed for everything from greener construction materials to allowing commercial landlords and developers to manage the carbon footprints of their buildings. UK business Plentific, which provides landlords and facilities management companies with a digital platform to better manage repairs and maintenance through contractors, is just one example of a proptech successfully expanding overseas and recently raised approximately $100 million. We’ve also seen the growth of a few specialist UK-based prop-tech VC funds to help drive growth in this area.

I think we’ll also see continued interest in the education technology space, which has produced a few private unicorns in the US but is still relatively nascent in the UK. However, Covid has accelerated ed-tech adoption here and advances in AI to deliver personalised learning experiences look set to transform education and attract further investment.

Another raft of high-growth UK businesses like Depop (acquired by Etsy last year), continue to make a name for themselves by responding to the consumer appetite for reusing and recycling products. Barclays has invested in fashiontech business Responsible, which enables circularity in the fashion industry, partnering directly with brands to extend the life of garments and impact sector-wide change. I’m sure the popularity of other European companies in this space, like Back Market, which refurbishes smartphones and laptops, will encourage investors.

Babylon Health’s success story is just one of several in health-tech and I expect to see more of the same in 2022, building on the UK’s world-renowned life science and medical research and development centred on London, Oxford and Cambridge. As with education, AI is making a real difference and has the power to improve patient outcomes and reduce pressure on primary care providers. We’re likely to see an increasing focus on AI in everything from medical diagnosis to back-office systems.

Finally, with businesses facing increasing levels of scrutiny and regulation, many are looking to regulatory technology to help them cut the increasing costs of compliance, particularly in the financial services sector, given the demands of know-your-client, anti-money laundering and identity verification. I think we’ll probably see more examples of the type of success that UK-based Onfido has had in securing backing for its innovative technology that allows businesses to digitise identity verification.

Key challenges

Thinking about possible challenges in the year ahead, the high valuation of some tech companies might, of course, soften if the Covid-led consumer behaviours that are driving many business models turn out to be more transitory than expected. However, while the rate and scale of investment might fluctuate, I think there are fundamental reasons why these businesses are getting traction and I don’t expect that to change significantly.

On a more pessimistic note, I am constantly struck by the lack of diversity in the high-growth tech world, and this is undoubtedly a challenge that needs to be addressed. For our part, I’m pleased to say Barclays has teamed up with venture capital firm Anthemis to set up The Female Innovators Lab, which is dedicated to supporting female entrepreneurs. Barclays has also created a Black Founder Accelerator – a programme to champion Black founder-led businesses through masterclasses and one-to-one mentoring.

There’s also the skills gap to contend with. While AI is driving many of the tech advances out there, we still face a shortage of ‘deep tech’ skills in AI, coding and machine learning. There’s no getting away from the fact that Brexit has had an impact on our ability to attract people with the relevant skills to come and work in the UK. Businesses, educators and government will need to work hard to ensure we have access to a talent pool with the skills to power tech innovation.

Those challenges aside, I’m bullish about high-growth tech in 2022 and beyond. Alongside our day-to-day banking and world class payment solutions, Barclays is doing its bit to support companies by providing funding at VC stage for innovative disruptors in their respective industry sectors, like Responsible and Gousto, that are looking to accelerate their growth. Our door is always open to businesses with similar ambitions.

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