Financial technology companies are the most attractive technology subsector for venture capital investing in the U.K., despite total investment in fintech falling to $4.57 billion in 2020 from $6 billion in 2019, according to the 2021 report by government-backed entrepreneur network Tech Nation.

The year-over-year drop was attributed to companies diversifying into debt and alternative financing options.

The U.K. is Europe's biggest fintech hub, both in terms of employees and investment, while on the global stage it lags only behind the U.S., which saw a total of $19.6 billion invested in fintech companies during 2020.

Digital bank Revolut Ltd. and insurtech Ki Insurance raised roughly $580 million and $500 million, respectively, during the year to become two of the U.K.'s 10 "superstar scaleups," which made up 20% of all technology venture capital investments in 2020.

Investments during the first half were relatively muted due to the uncertainty surrounding Brexit and the coronavirus pandemic but picked back up to record quarterly levels in the latter half. For the third and fourth quarters of 2020, investments in U.K. tech companies reached $3.92 billion and $4.71 billion, respectively, compared to $3.39 billion in the first quarter and $3.43 billion in the second quarter of the same year, according to the report.

Overall, venture capital investments in technology companies in the U.K. hit a record high of $14.9 billion in 2020, ranking it third-highest on the global stage, as the pandemic triggered the acceleration of digitalization across the world. It is now home to 80 technology "unicorns," or private companies valued at over $1 billion, Tech Nation noted.

In 2020, 63% of all tech-related venture capital investments in the U.K. were from outside the country, while 37% were domestic.