Funding Crisis, AI, Government Action Need

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.