Tech City UK Blog

While data fuels much of modern life, raw numbers can only ever tell you part of the story. For a fuller picture, there’s no substitute for old fashioned shoe-leather and getting out on the road. Last month, the Tech City UK team crisscrossed the country, from London to Edinburgh, to share the findings of our Tech Nation report 2017 and meet some of the UK’s most impressive tech companies on their home turf.

SoftBank’s recent investment in UK virtual simulation startup Improbable – valuing the company, founded by two Cambridge graduates, at over $1bn – capped an extraordinary few weeks for UK tech in which evidence gathered by Tech Nation 2017 also reaffirmed Britain’s position as Europe’s runaway digital capital.

Among many other things, the report revealed:

Tech investment in the UK reached £6.8bn in 2016, more than twice as much as any other European country and significantly more than its closest rival, France, which secured £2.4bn. In fact, UK tech received more investment than the next four countries (France, Germany, the Netherlands and Denmark) combined.

It is also ahead of the rest of Europe on other measures: The UK has eight of Europe’s top 20 universities. London has almost twice as many GitHub users as Paris or Berlin, which shows just how many developers are based here. Meanwhile, last year, more than 22,000 Meetups (one of the world’s leading software development platforms) took place in London — nearly three times as many as any other hub.

The UK’s digital tech industry turned over an estimated £170bn in 2015 and it is growing at twice the rate of the wider economy. Furthermore the industry’s contribution to the UK’s wider economy – its gross value added, to use economist-speak – was £97bn in 2015.

The digital tech industry created 85,000 more jobs over the past year, taking employment in the sector from 1.56m in 2014 to 1.64m in 2015 – that’s double the rate of job creation of the rest of the economy.

London continues to lead the way, as Europe’s truly global technology epicentre. More than a third of Europe’s tech unicorns ($1bn-valued businesses) are based in the capital, while it is home to four of the continent’s powerhouse VC investors — Index Ventures, Accel, Balderton Capital and Atomico — as well as to over 300,000 digital tech economy jobs. In addition, 78% of London’s digital tech businesses were optimistic about the city’s prospects for digital growth.

The equivalent figure for Manchester — home to three notable universities, fast-growth companies such as Boohoo and The Hut Group, plus a growing number of investors, accelerators and coworking spaces — was 85%, while 75% hailed the city’s quality of life. “Manchester is one of the world’s leading research centres for computer vision and machine learning with a great talent pool coming out of the universities,” David Levine, CEO of DigitalBridge, told Tech Nation. “In addition costs of living are on average 42% cheaper than those in London. Yet we can get to the capital in just two hours.”

And that sense of optimism was evident wherever we went on our whistle-stop Tech Nation tour, covered exclusively by Tech City News (which isn’t related to Tech City UK), and encompassed some of Britain’s most dynamic tech clusters.

In Edinburgh – the location of two UK unicorns Skyscanner and FanDuel, and where more than 25,000 work in the tech sector – an audience at co-working space CodeBase heard how the city’s startups benefit not only from being outside the “London bubble” (which can be overly-concerned with raising money), but also from its powerful sense of community. Chris Downie, CEO of retail-tech startup Pasabi described how the local startup network supports and advises founders through the inevitable bootstrapped business turbulence.

In Birmingham, where companies like Kaido and LightwaveRF are flourishing, entrepreneurs relish the fact that the city is a brilliant place for people to achieve a well-balanced lifestyle, while starting a business. However, Tech Nation found that only 25% of techworkers rated the city’s skilled talent supply as good.

Similar sentiments were expressed in Bristol, about which our report revealed that 92% of tech workers (across both Bristol and Bath) feel they have a good quality of life, with 88% describing their optimism about the area’s digital growth as ‘good’. Our Bristol event, meanwhile, also heard that all important investment would reach firms “with the right teams and the right ideas”, according to Steve Cliffe, CEO of Ultrahaptics, which has raised over $15m to date.

In Cambridge, there was praise for one of the UK’s strongest (and most enduring) ecosystems, which has produced some of Europe’s best-known technology companies including ARM, SwiftKey, Raspberry PI and Darktrace, and was revealed in Tech Nation to have created 353 startups-a-year, from 2011-2015. While the Newcastle leg of the tour cast a spotlight on the region’s skills need (the report found that only 22% rated its talent supply as “good”), the event also heard how the city’s digital tech economy employs over 20,000 people and creates an average of 211 startups a year.

The report detailed a similar talent supply problem in Liverpool, where the equivalent number was 28%, although other data was far more encouraging, including a 29% increase in the number of digital tech businesses in the hub, between 2011 and 2015, and average (advertised) salaries of those employed in the digital tech sector of £45,011 (compared with £32,994 for those who aren’t.)

While these are just the briefest of flavours from a range of UK hubs, it has become increasingly clear that our multi-faceted and geographically diverse home-grown industry is the envy of Europe – with deep reservoirs of expertise in sectors such as fin-tech, e-commerce and A.I. which have earned worldwide acclaim.

However, with Brexit on the horizon, and rivals such as Paris, Berlin, Amsterdam and Stockholm continually evolving, the UK cannot take its position for granted.

We are currently witnessing unprecedented and accelerating digitalization across all strands of daily and business life: from architecture to retail, and automated vehicles to healthcare. At present we make an arbitrary distinction between the tech sector and other industries, between on and offline. Yet in only a few short years, such distinctions will have blurred away entirely.

We have created world-leading gaming companies, like Rockstar North, and online retailers like ASOS with international clout. Delivery logistics company, Deliveroo has gone from employing just a handful of people in 2013 to over 1,000 today. That kind of explosive company growth, over such a short period of time, is unprecedented in the history of commerce but increasingly typical in the digital world. Now sectors in which we can also lead the world, such as prop-tech, ed-tech and health-tech, are experiencing similar growth-spurts.

The corporate world is also waking up to the necessity of adapting to this digital-shaped landscape. Some of the UK’s biggest businesses like O2 and British Airways’ parent company IAG are funding startup accelerators, while easyJet is using AI to work out when they might have problems and retraining people in digital skills to help them develop their business.

But not only do we need to build on such advances, we must always do more to make sure that there are favourable conditions in which digital innovation can thrive. Our schools are teaching digital skills and competence, so that employers can find the talent they need to build these fast-growing businesses, but we need to move even quicker to give those already in the workforce opportunities to access training initiatives and re-skill themselves. Furthermore, removing obstacles to digitalization and making sure that our digital infrastructure is first class is a priority, whoever wins the election.

As the UK prepares to leave the European Union we have a once-in-a-lifetime opportunity to take our digital sector to the world and be a beacon for top tier entrepreneurs, talent and investment. And as reflected in the UK government’s modern industrial strategy and its recently published digital strategy, the tech sector itself must lead the charge.

Hitting the road to see this country’s digital clusters and witnessing the depth and sector diversity in the UK’s tech revolution has convinced me that our startup hotspots will not only increasingly power the national economy, but they can take on the world too.

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