Tech Nation, the government-backed agency that has helped 5,000 technology companies to develop and grow, is closing its doors at the end of March, saying that it cannot continue without government funding.

Launched in 2011 by then prime minister David Cameron, Tech Nation said it had decided its operations were not viable without the core funding provided by the Department for Digital, Culture, Media and Sport.

Last month, DCMS said it had awarded the two-year contract worth £12 million that previously went to the agency to support an initiative run by Barclays Bank instead.

In addition to running training schemes for entrepreneurs, Tech Nation also processed around 1,200 visas a year for the Home Office under its Global Talent Visa route. Tech Nation said it would continue to process these applications “in the immediate term”.

The decision comes just two weeks after Grant Shapps, the business secretary, said he wanted to make the UK a better place for tech start-ups to grow. Last week, Jeremy Hunt, the chancellor, promised “long-term thinking” to make the UK the next “Silicon Valley”.

Gerard Grech, Tech Nation’s chief executive, said for every pound of public funding it had received it had returned £15 in value, and had helped the likes of challenger bank Monzo and travel search site Skyscanner expand. “Tech Nation has made a huge and positive impact on the UK’s digital economy,” he said.

Leading tech entrepreneurs that have worked with Tech Nation voiced criticism of the decision to drop the agency in favour of paying Barclays to develop its Eagle Labs network of start-up incubators.

Martha Lane Fox, co-founder of lastminute.com and president of the British Chambers of Commerce, said: “As an entrepreneur and digital champion, I’ve witnessed first-hand the impact that Tech Nation has had in creating one of the most exciting and dynamic parts of our economy. The skills they’ve equipped entrepreneurs with and opportunities they’ve created have been second to none. They will be missed.”

Tom Adeyoola — a retail software developer who also founded Extend Venture to support black entrepreneurs — said Tech Nation’s efforts to support ethnic minority entrepreneurs were making a difference. “It is saddening and a real loss for the UK, that Tech Nation and these important programmes will no longer be continuing,” he said.

Tessa Clarke, co-founder and chief executive of Olio, which tackles food waste, added that she was “deeply disappointed” the government grant had gone to a bank when Tech Nation had “such incredible momentum”.

Tech Nation said it would try to sell its remaining programmes. The visa scheme it operated is targeted at highly skilled migrants who are looking to move to the UK for work, typically in financial services technology firms, with others joining artificial intelligence, cybersecurity and data analysis businesses. The agency said a quarter of the 2,500 individuals it had endorsed for the visa since 2020 had gone on to help create new businesses in the UK.

Dom Hallas, executive director of the Coalition for a Digital Economy, which represents tech start-ups, said the government must now focus on creating the best environment for such businesses. “The death of Tech Nation is the end of an era for the start-up ecosystem in the UK. The idea of the government as a provider of start-up advice to founders backed by Tier 1 venture capital is finished,” he said.

The Home Office said it would “explore the long term changes necessary in light of Tech Nation’s planned closure”.

“We will also take every available step to ensure that applicants already part of the Global Talent route are not disadvantaged by the closure, so the UK can continue to benefit from the brightest and best living and working here,” a spokesman said.

Yoko Spirig, co-founder and CEO of Ledgy commented: “For entrepreneurs across Europe, the UK has always stood out as a positive example of a progressive tech hub that champions innovation and balanced risk-taking.

Looking over at the UK from Switzerland, my co-founders and I were inspired by Tech Nation and the work it did championing startups and knitting together the many different parts of the UK tech scene. Organisations like Tech Nation helped us decide that the UK was a strategic next step for us which led to Ledgy officially opening a London office last year.

“We are very disappointed to learn that Tech Nation will be shutting down, especially during a difficult time in the sector which has seen investment drop off, valuations fall and widespread layoffs. It’s essential that the organisation which carries this work forward continues to take advantage of the incredible research that happens in British universities and produce exceptional tech companies to ensure the UK stays out in front as a positive example for other European markets.”