Garry White, chief investment commentator at Charles Stanley, looks at UK agritech and why it has a promising future.
The main challenge for farmers in the UK and across the world in coming decades will be to produce increasing quantities of nutritious and healthy food, while at the same time making significant environmental gains including improving soils, saving water, and reducing carbon emissions. Is there any help towards costs?
A decade ago, the UK government published an agritech strategy document which set out for the first time how it would collaborate with scientific researchers and the food and farming industry to leverage the strengths of the British agricultural technologies sector. The overarching aim was to bridge the gap in translating high-quality agricultural research into practical applications. It pledged to invest £160m to strengthen existing and develop new collaborations between public and private sector organisations. This is important. It’s all well and good to be a world leader in scientific research and innovation, but these great ideas need to be commercialised to create sustainable, long-term profit-generating businesses. They also need to benefit the environment and wider society.
Also in 2013, there was one megadeal that underscored the future importance of the agritech sector to investors. Monsanto acquired Climate Corporation, which uses machine learning and ‘big data’ to predict the weather and other essential elements for agribusiness, for about $1bn. Since then, global investment in the sector has seen a significant acceleration. The Climate Corporation was a startup established by early Google employees who clearly recognised the future role of big data in food production. It also underscored the strategic importance of nurturing start-ups. In 2016, the Centres for Agricultural Innovation were unveiled as part of a new collaborative model between the agritech sector and the government. There were four separate centres:
- Agrimetrics is focused on agricultural informatics and metrics of sustainability. Agrimetrics uses data science and modelling to build a more productive, sustainable and efficient food system.
- The Centre for Crop Health and Protection (CHAP) aims to revolutionise how farmers manage crop threats including pests and disease, both in the UK and overseas.
- The Centre for Innovation Excellence in Livestock (CIEL) has a brief to create new livestock technology and products to boost the profitability and productivity of livestock farming.
- The Agricultural Engineering Precision Innovation Centre (Agri-EPI) operates in precision agriculture to help the UK’s agri-food sector develop advanced technologies that will increase productivity and sustainability in UK agriculture.
In September this year, it was announced that the last three of these centres will merge into a single entity. The reasoning behind this was to facilitate a stronger cross-sectoral approach which will drive better outcomes for the agritech sector across innovation, commercialisation, and adoption, as well as research. The merged organisation was asked to develop a proposal to establish an agritech “catapult”.
Catapults are established by Innovate UK, the government’s innovation agency. They are world leading technology and innovation centres at more than 50 locations across the UK, that are charged with transforming the UK’s capability for innovation in sectors of strength. The new agritech catapult will join the nine catapults currently established in sectors including semiconductors, cell and gene therapy and energy systems.
Agritech a hot UK sector
Earlier this year, a report on agritech investment was released by intellectual property specialists GovGrant to discover the global hotspots attracting capital to the sector. Worldwide there are just over 6,000 investors in Agritech. For the UK the figures are a fraction of this, with only 361 investors funding UK Agritech. However, government-backed Innovate UK is one of the top global investors in the sector, evidence that the UK punches above its weight, rivalling the European Union’s Horizon programme.
The UK’s thriving agritech sector encompasses various categories, including consumer-focused apps and services, food delivery, food processing, food safety and traceability, smart kitchens and technology for restaurants, the next generation of food and beverages, and waste and surplus food management, as well as farming systems. Of the total funds invested in agritech worldwide in 2022, most investment was in the US, followed by India – but the UK was in the number three spot, according to AgFunder. Total investment in UK agritech start-ups was $1.3bn compared with $12.4bn in the US and $2.7bn in India.
The support structures to help nurture new companies at the cutting edge of the fourth agricultural revolution in the UK are extremely promising for the future of this high-valued added industry. There remains many challenges for startups and fledgling businesses in cutting edge sectors, but the willingness for the UK government to invest and provide support is a real advantage for the UK sector. The future of UK agritech is very promising indeed.