Technology has been a key driver of the music business in the digital age. But U.K. music tech companies are facing a funding crisis when entering their growth stage, according to the second annual Sound Investments report from trade association Music Technology U.K. (MTUK), which was unveiled on Monday and will be discussed at SXSW London 2026 later in its opening day.
Highlighting that funding for growth-stage firms plunged by 90 percent between 2020 and 2025 and that generative artificial intelligence continues its rapid rise, the trade group emphasized that “AI raises the stakes for government action.”
The study, entitled “Sound Investments 2026: Back the Sector,” produced by MTUK in partnership with research firm Beauhurst and lead sponsor support from consulting firm KPMG U.K., is based on an analysis of six years of investment data across 922 U.K. music tech companies.
Music tech includes the likes of streaming infrastructure, pricing and subscription systems, fan and other data and services that enable rights holders to better engage with fans, including through premium access, commerce, and community features. On the live music side, ticketing, venue operations and touring logistics are among the areas tapping into tech solutions. “Technology is the infrastructure on which the modern music economy runs – an infrastructure that spans live, recorded, publishing, sync, licensing, education, hardware, creator tools and more,” notes the MTUK report. “Growth is being driven not just by more consumption, but by new ways to package, distribute, and monetize music. Without
innovations in infrastructure, that growth will undoubtedly fail.”
No surprise that it put a spotlight on one core challenge. “The U.K.’s music tech industry faces a structural funding crisis with funding for growth-stage companies falling 90 percent, from £101 million ($136 million) in 2020 to £10 million ($13.5 million) in 2025,” according to a summary of Monday’s report. “The U.K.’s primary challenge is not starting companies – it is scaling them.” Growth-stage companies require capital to move from being product- and market-fit to international expansion mode.
Among other data contained in the MTUK report, the sector attracted more than £809 million ($1.09 billion) in total investment between 2020 and 2025, peaking at £183 million ($246 million) in 2021. Since then, annual investment has experienced a sharp fall to £68.8 million ($92.6 million) in 2025. That amounts to a 51 percent drop over that period, “a significantly steeper decline than the wider reduction in overall U.K. tech funding during the same period – a decline of just 4.4 percent.”
Compared to the U.S., in 2020, U.K. investment in the music tech industry equated to 76 percent of U.S. funding. But by 2025, that figure had collapsed to 21 percent.
Matt Cartmell, CEO of Music Technology U.K.
Courtesy of Music Technology U.K.
While investment in seed-stage companies more than doubled over the six-year period, from £8.4 million ($11.3 million) in 2020 to £22.1 million ($29.7 million) in 2025, funding of growth-stage companies has been decimated. “This lack of growth-stage investment forces many U.K. companies to look overseas for investment and, in some cases, consider relocating their operations to markets with greater access to capital and liquidity,” the Sound Investments 2026 report emphasized, also mentioning the need to “strengthen its visibility and appeal within international investment ecosystems.”
Among international investors, the U.S. was by far the largest source of overseas capital, participating in 14 percent of all deals, the study noted. But too often, so the report, U.K. players get sold to foreign companies in “premature acquisitions.”
The report is a call to action. “When we published the first Sound Investments report last year, we argued that U.K. music tech was undervalued, underinvested, and underrepresented,” said Matt Cartmell, CEO of MTUK. “A year on, that is changing – but not fast enough.”
Calling this “a pivotal moment” for the sector, Monday’s report identified three key initiatives needed for future development.
The first is AI’s impact on the market. “Generative AI has created a new kind of music tech buyer: technology platforms with an urgent commercial need for licensed music data, rights infrastructure, and proprietary content pipelines,” the study pointed out. “U.K. companies building in these areas are increasingly becoming acquisition targets before they have had the chance to scale domestically.” And the report emphasized a sub-sector of particular appeal, saying: “AI is fundamentally changing the strategic value of music tech companies, particularly those building at the intersection of rights infrastructure and data.”
Point 2 relates to policy. With the U.K. government supporting the creative industries, MTUK urged that “the time to position music tech explicitly within these frameworks is now.”
The third and final priority outlined in the report is tied to competitive pressure. “In an increasingly competitive global market for technology talent, capital and ownership, the U.K. must deploy strategies to support the music tech sector, so that the economic value it creates is retained in the U.K.,” the report argued.
Creative Industries Minister Ian Murray said: “Music tech has a vital role to play in driving economic growth, attracting investment, and shaping the future of music and innovation. This report highlights both the potential of the sector in the U.K., but also the challenges facing many of our pioneering organizations. Through our Creative Industries Sector Plan, we are committed to turbocharging support for high-growth creative businesses, supporting innovation, and ensuring the U.K. remains one of the best places in the world to work in creative technology.”
Download the full Sound Investments 2026 report here.
