National Excellence

The UK’s digital tech sector grew 50% faster than the wider economy in 2015. In this section we demonstrate how digital tech innovation across the country is helping to strengthen local economies and make the UK’s business environment even more dynamic and productive.

Cluster map of the UK 

Tech Nation 2017 has profiled 30 of the leading digital tech clusters across the country. These clusters form the building blocks of the UK’s digital tech economy and ecosystem.

We highlight the tech innovation and increasing amounts of investment flowing into regional clusters, further strengthening the country’s network of digital excellence. Our analysis looks at digital tech businesses and growth rates compared to non digital, digital tech jobs and salaries, digital skills and local tech ecosystems. We note that despite challenges, digital businesses across the UK remain overwhelmingly optimistic about their future.

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1. KEY STATS: The UK has 85,000 more digital tech jobs compared to 2 years ago and digital tech turnover has grown by nearly 25% in 5 years

Average UK Cluster Performance (2011 – 2015) 

Performance
Digital Tech GVA 93%
Digital Tech Jobs 93%
Digital Turnover 89%
Digital Tech Productivity 60%

Source: ABS / BSD, Tech City UK, 2015. Based on turnover per worker (ABS / BSD, 2015)

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Digital Tech Density Digital Tech Turnover (£bn) Turnover Growth (2011 -15) High Growth Businesses
Reading
7.26
London
£56bn
Dundee
171%
Bournemouth & Poole (26%)
Bristol & Bath 4.35 Reading
£12.5bn
London
106%
Newcastle
(22%)
Cambridge
1.79
Bristol & Bath
£8.1bn
Sunderland
101%
London
(20%)
Southampton 1.57 Manchester
£2.9bn
Bristol & Bath
87%
Glasgow
(19%)
Oxford
1.53
Cambridge
£2.1bn
Edinburgh
85%
Brighton
(18%)

 

2. DIGITAL TECH BUSINESSES: UK tech businesses are growing 2X faster than non digital businesses

 

In 2015, the turnover of UK digital tech was estimated at £170 billion, a growth of 22% (£30 billion) in just five years. 

Over the same five-year period, the total number of UK digital tech businesses grew by 28%. That is more than twice as fast as the growth in non-digital businesses (up 13%). In 2015 alone, the number of UK digital tech businesses grew by 7%, compared with just 4% in the non-digital sector.

These new businesses are creating jobs, generating wealth and supporting the wider economy. Moreover, by stimulating new technologies, innovations and efficiencies in other sectors, they boost productivity across the board too.

London has seen the greatest number of new digital tech businesses emerge, up by 42% in five years. Newcastle and Belfast have seen almost as impressive growth figures over this period, at 39% and 37% respectively. What is more, in 13 of our 30 clusters the quantity of digital tech businesses has increased by more than a quarter.

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YEAR GROWTH IN NUMBER OF DIGITAL BUSINESSES GROWTH IN NUMBER OF NON-DIGITAL BUSINESSES
2011 100% 100%
2012 103% 101%
2013 112% 105%
2014 119% 109%
2015 128% 113%

Source: BSD, Tech City UK, 2015

3. DIGITAL TECH BUSINESSES: digital tech businesses are being created twice as fast as non-digital businesses. In London, a new tech business is born every hour

City Start up birth rate (2011-2015)
London 42%
Belfast 37%
Edinburgh 34%
Newcastle 34%
Birmingham 33%
Glasgow 33%
Nottingham 31%
Brighton 29%
Leeds 29%
Liverpool 29%
Cardiff & Swansea 28%
Plymouth 28%
Sheffield 27%
Leicester 24%
Bristol & Bath 23%
Manchester 23%
Hull 21%
Reading 21%
Truro & Redruth 21%
Cambridge 20%
Exeter 18%
Norwich 18%
Southampton 18%
Sunderland 18%
Oxford 17%
Bournemouth & Poole 16%
Dundee 16%
Middlesbrough 14%
Worcester & Malvern 11%
Ipswich 2%

 

In 2015, the birth rate of digital tech businesses across the UK was 15%. By comparison, the business birth rate across the wider economy was just over 11.5%.

Business birth rates – a measurement of new companies as a proportion of all businesses in an area – can tell us a lot about the vitality of an economy.

Business formation, of course, is influenced by the economic climate. Business birth rates, however, are also likely to be higher in places where the potential for profit is high and the right resources – not least talent and infrastructure – are in place.

So the outlook is strong at the national level, but how does it break down regionally? In the same year, all but four of our 30 clusters had a digital tech birth rate that exceeded the average in non-digital sectors. An impressive one in three had digital tech birth rates of over 15%: Sunderland 19.3%, London 18.7%, Glasgow 18.3%, Newcastle 17.5%, Edinburgh 17.2%, Liverpool 16.8%, Leeds 15.9%, Manchester 15.6%, Birmingham 15.3% and Middlesbrough 15.1%.

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4. DIGITAL TECH BUSINESSES: High growth companies are nearly twice as prevalent in the digital tech sector compared to non digital tech

17% of all UK digital tech businesses with ten or more employees were high-growth. In the non-digital sector, just 9.8% of businesses of the same size could claim the same status.

High-growth businesses are defined as businesses whose growth in annual turnover places them in the top 10% nationally. They span all sectors of the economy.

So, more high-growth firms are to be found in the digital tech sector. This matters, because businesses like these play a major role in the UK’s economic growth. Not least because they are more productive than average and tend to create high quality, well-paying jobs. Our analysis revealed Bournemouth & Poole, Newcastle and London to be home to the highest concentrations of high-growth digital tech businesses.

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TTWA name PERCENTAGE OF HIGH GROWTH FIRMS (BY TURNOVER, 2014)
Bournemouth & Poole 26%
Newcastle 22%
London 20%
Glasgow 19%
Brighton 19%
Oxford 18%
Reading 18%
Belfast 18%
Bristol & Bath 17%
Manchester 17%
Edinburgh 17%
Leeds 16%
Cambridge 15%
Nottingham 15%
Leicester 12%
Birmingham 11%
Sheffield 11%
Southampton 10%

 

5. DIGITAL TECH BUSINESSES: Reading has the highest concentration of digital tech businesses followed by Bristol and Cambridge

City Digital Density (Turnover)
Reading 7.26
Bristol & Bath 4.35
Cambridge 1.79
Southampton 1.57
Oxford 1.53
Brighton 0.92
Hull 0.92
London 0.86
Birmingham 0.78
Nottingham 0.77
Worcester & Malvern 0.69
Newcastle 0.69
Dundee 0.69
Manchester 0.63
Glasgow 0.54
Belfast 0.49
Exeter 0.47
Redruth & Truro 0.44
Leeds 0.44
Bournemouth & Poole 0.44
Cardiff & Swansea 0.42
Leicester 0.39
Plymouth 0.35
Norwich 0.34
Ipswich 0.33
Edinburgh 0.23
Sunderland 0.21
Liverpool 0.2
Sheffield 0.19

 

Two clusters emerge with exceptional digital tech concentrations – Reading and Bristol & Bath. Interestingly, London’s LQ is below one. Despite being the largest digital tech hub in Europe by some margin, the sheer size and diversity of its economy dilutes its digital tech concentration.

The geographic concentration of digital tech businesses is telling. Similar businesses tend to group together, pooling resources and requirements. But why does this matter?

Broadly speaking a high concentration of digital tech businesses is good for a local economy, since it is associated with highly skilled and higher paid employment and higher levels of GVA. This concentration is called Location Quotient (LQ) and is a measure of digital density, relative to the UK overall. The higher a cluster’s LQ, the greater the concentration of digital tech businesses. In the chart, a value of one equals average digital concentration, while a value of greater than one implies a higher concentration.

 

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6. DIGITAL TECH JOBS: Digital Tech jobs are being created twice as fast as non-digital jobs

Between 2011 and 2015, the number of digital tech jobs across the UK grew by 17%. That is more than twice the 8% growth seen in non-digital sectors.

On the surface, it appears that 3% of all UK employees are in the digital tech sector. However, when we consider those who work in digital tech roles within other sectors, the figure rises to 6% (a total of 1.64 million jobs.) This represents an overall increase of 85,000 digital tech jobs during 2015 alone.

Where are these new jobs springing up? Employment in London-based digital tech businesses nearly doubled between 2011 and 2015. Particularly impressive increases in percentage terms were also seen in Dundee, Redruth & Truro and Sunderland.

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City Digital Tech Employment Growth between 2011 – 15
London 95%
Dundee 67%
Redruth & Truro 61%
Sunderland 49%
Edinburgh 46%
Brighton 36%
Southampton 34%
Plymouth 33%
Liverpool 31%
Bournemouth & Poole 30%
Reading 30%
Exeter 29%
Leeds 29%
Cardiff & Swansea 29%
Manchester 27%
Norwich 25%
Worcester & Malvern 24%
Newcastle 22%
Oxford 20%
Sheffield 15%
Leicester 15%
Ipswich 10%
Cambridge 10%
Nottingham 10%
Hull 9%
Birmingham 9%
Glasgow 7%
Belfast 1%

Source: BSD, Tech City UK, 2015

7. PRODUCTIVITY OF DIGITAL TECH EMPLOYEES: Digital Tech employees are twice as productive as their non-digital counterparts and the gap is growing

 

 

DIGITAL ECONOMIC CONTRIBUTION PER WORKER NON-DIGITAL ECONOMIC CONTRIBUTION PER WORKER
2011 £92,000 £44,000
2012 £92,000 £45,000
2013 £93,000 £46,000
2014 £97,000 £49,000
2015 £103,000 £50,000

Source: BSD, Tech City UK, 2015

The GVA of a digital tech worker in the UK is more than twice that of a non-digital tech worker, (£103,000 compared to £50,000).

The productivity gap is growing too, rising from £48,000 to £53,000 over the last five years – further evidence that the digital tech sector is adding significant value to the UK economy.

Gross Value Added (GVA) calculates the value of goods and services produced, subtracting the costs involved in their production. This measure, therefore, gauges the real contribution of individual sectors to the broader economy.

 

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8. DIGITAL TECH SALARIES The average digital tech salary is nearly 45% higher than the average non digital tech salary

The average advertised digital tech salary in the UK during 2016 was £50,663. This is 44% higher than the average non-digital salary of £35,155.

This gap between digital tech and non-digital salaries is not only wide, but it is growing. Since 2012, there has been a 13% increase in the advertised salaries of digital tech jobs, compared with only a 4% increase in those of non-digital jobs. So while in 2012, digital tech salaries were 33% higher than non-digital ones, by last year the gap had widened to 44%.

Data-centric roles offer some of the highest salaries in the sector, with information security roles following close behind. Database architects and business intelligence architects are taking home some of the biggest pay cheques – last year the average advertised salaries for these roles were £67,624 and £62,758 respectively – reflecting the surge in businesses seeking to harness the power of their data.

For people with the right digital tech skills there is clearly a wealth of opportunity across the UK. Unsurprisingly, the sector’s highest advertised salaries are within the capital. London does not, however, have a monopoly on earning power. Over the past year, most clusters have seen digital tech salaries grow. Newcastle and Norwich have experienced particularly impressive growth.

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DIGITAL TECH SALARY NON-DIGITAL TECH SALARY
2012 £44,998 £33,808
2013 £46,965 £34,816
2014 £47,675 £35,956
2015 £49,427 £35,797
2016 £50,663 £35,155

Source: Burning Glass, Tech City UK, 2016

9. SALARIES BY CLUSTER: Those employed in the three clusters that pay the highest salaries are least satisfied with cost of living

City Average digital salary
London £61,402
Reading £52,998
Edinburgh £52,639
Newcastle £50,370
Leeds £49,968
Glasgow £48,203
Oxford £47,690
Manchester £47,478
Bristol & Bath £47,207
Cambridge £46,737
Southampton £46,156
Sheffield £45,908
Liverpool £44,534
Brighton £44,038
Birmingham £43,586
Nottingham £43,584
Plymouth £43,366
Cardiff & Swansea £43,286
Ipswich £41,002
Norwich £40,718
Leicester £40,017
Bournemouth & Poole £39,700
Exeter £38,687
Sunderland £38,408
Belfast £37,159
Worcester & Malvern £36,650
Dundee £36,059
Middlesbrough £36,047
Hull £35,245
Truro and Redruth £30,501

 

We know that digital tech salaries are almost double non-digital salaries. However, salaries tell only half the story. How far that money goes will also play its part in determining where people choose to base their digital tech businesses.

We asked the digital tech community how satisfied they were with the cost of living in their local area. The answers were revealing: Those employed in the three clusters that pay the highest salaries are less satisfied than the average.

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10. COST OF LIVING: Newcastle, Sunderland, Nottingham and Hull emerged as the most affordable digital clusters to live and work in

Those with digital tech skills might be starting to find themselves better off in locations they had not previously considered. Salaries may stretch much further in Newcastle, Sunderland or Nottingham than in London, Oxford or Cambridge.

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City Salary to House Price Ratio
Newcastle 3
Sunderland 3
Nottingham 3.1
Hull 3.2
Liverpool 3.2
Middlesbrough 3.2
Sheffield 3.2
Glasgow 3.4
Leeds 3.6
Belfast 3.9
Manchester 3.9
Dundee 4
Birmingham 4.2
Leicester 4.2
Cardiff & Swansea 4.3
Plymouth 4.4
Ipswich 4.9
Southampton 5.3
Edinburgh 5.6
Norwich 5.6
Worcester & Malvern 5.8
Truro & Redruth 6.6
Bournemouth & Poole 6.7
Bristol & Bath 6.7
Exeter 6.9
Reading 7.3
Brighton 9.4
London 9.4
Oxford 10.9
Cambridge 11.2

 

 

11. DIGITAL TECH SKILLS: Beyond London there is a high concentration of digital expertise across the country, with clusters such as Cambridge, Manchester and Newcastle taking top place


Source: Github, Tech City UK, 2016

Our analysis of Github data shows that beyond London, Cambridge has far more Github users than any other UK cluster. In fact, with nearly 4,000 users, the city is ranked eighth in our Europe-wide rankings, meaning it is home to an impressive concentration of digital expertise.

The highest numbers of Github users covering all the major languages are to be found in Cambridge, Manchester, Edinburgh and Newcastle, illustrating that these clusters boast a notable depth of programming talent.

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12. DIGITAL TECH SKILLS: Talent supply remains the number one challenge facing digital tech businesses in the UK

We asked members of the UK’s digital tech community about the challenges they face when it comes to running and growing their businesses.Over 50% highlighted a shortage of highly skilled employees. In fact, nearly 25% described sourcing talent as a ‘major challenge’.

 

This skills shortage is beginning to be reflected in wage negotiations too. Over a third of digital tech businesses said that candidates are asking for more money than they can afford to pay. Meanwhile, 10% of digital tech businesses cite relocation and immigration challenges as a factor in their struggle to recruit. To continue to grow, digital tech businesses highlight that they need to be able to recruit the brightest and best workers from the UK and elsewhere. Analysis of Office of National Statistics Annual Population Data shows that 7% of workers in the UK’s digital tech economy are from non-EU nations, while 6% are from the EU (excluding Britain).

To continue to grow, digital tech businesses need to be able to recruit the brightest and best workers from the UK and elsewhere.

So, in total, some 13% of jobs in the digital tech sector are currently filled by international workers – up from 11% in 2011 and significantly higher than the 10% across the rest of the economy. London and the South East has attracted a high proportion of these international digital tech workers. The capital’s digital tech economy is particularly international – EU workers hold 11% of jobs in London and non-EU nationals fill a higher proportion still at 20%1.

Immigration aside, the current talent shortage could be significantly alleviated by encouraging more women into the digital tech sector. Presently, women are severely under-represented. Our survey underscored the fact that UK digital tech companies rely on an overwhelmingly male workforce – women were in the majority for only one in nine (11%) digital tech companies. Indeed, in over half (53%) of these businesses, men outnumber women by at least 3:1.

Digital tech companies could do more to attract and retain women as well as to challenge stereotypes and cultural biases

This is, of course, a highly complicated issue. Digital tech companies could do more to attract and retain women as well as to challenge stereotypes and cultural biases. Beyond this, however, lies a broader need to encourage women to embrace technology from a young age and to consider STEM careers.

This is based on analysis conducted for a Tech Nation UK report on immigration in the digital tech economy, due to be published in April 2017.

13. DIGITAL TECH COLLABORATION: The greatest number of Meetups outside of London were in Bristol & Bath, followed by Reading and Cambridge

 

Digital tech businesses interact with one another, and with other aspects of their local environment, in complex ways.

As a result, the health and performance of each business is dependent upon the health and performance of the whole. As we saw in our European analysis, Meetup data provides a good indication of the strength of local networks.

Within the UK last year, the greatest number of Meetups outside of London happened in Bristol & Bath. In fact, the largest concentration of JavaScript Meetups happened there too, and the same is true for PHP, Python and Java, indicating that this cluster is a networking powerhouse.

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NUMBER OF MEETUPS (2016)
Bristol & Bath 3909
Reading 3600
Cambridge 2698
Manchester 2192
Worcester & Malvern 1899
Bournemouth & Poole 1394
Sheffield 1282
Cardiff & Swansea 1279
Oxford 1205
Birmingham 1080
Leeds 1075
Leicester 957
Brighton 881
Liverpool 817
Southampton 722
Truro & Redruth 711
Edinburgh 687
Norwich 501
Newcastle 425
Hull 328
Belfast 306
Exeter 283
Sunderland 281
Glasgow 229
Ipswich 172
Dundee 7

 

Source: Meetup, Tech City UK, 2016

14. DIGITAL TECH ECOSYSTEMS: 85% of digital tech businesses made use of services in their local ecosystem, with mentoring from expert peers and co-working spaces the most valued

 

Source: Tech Nation 2017 Survey, Tech City UK

Meetups are one part of an ecosystem – a pattern of support mechanisms and networks that tends to repeat across all successful digital tech clusters. When we asked digital tech businesses across the UK which aspects of their local ecosystem they used, the three most popular responses were: mentoring, brand building activities (awards, for example) and co-working spaces.

Only 15% of the digital tech businesses we surveyed had made no use at all of local support systems, highlighting just how important they have become. Intriguingly however, the services that digital tech businesses use are not always those they claim to value most highly. As the analysis below shows, while incubator and accelerator services are valued highly, take-up for their services remains relatively low, suggesting that more could be done to promote and support them.

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15. DIGITAL TECH ECOSYSTEMS: Over 25% of the digital tech community highlight poor digital infrastructure as challenge to doing business

Over a quarter (28%) of digital tech community members cited poor digital infrastructure as a business challenge.

Perhaps surprisingly, this is not an exclusively rural issue. In fact, some of the highest proportions of dissatisfaction were in large cities such as Glasgow (where 55% say it is a challenge), Dundee (45%) and Brighton (42%).

Meanwhile, nearly 30% of digital tech community members cited their local transport infrastructure as a business challenge. Here, however, cities did perform better. While over a third (36%) of respondents rated their local transport infrastructure as good, ratings tended to be higher in larger conurbations.

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16. REGIONAL TECH INVESTMENT: Between 2015 and 2016 UK Investment in UK clusters beyond London grew by 50% to £4.6bn

The shape of digital tech investment in the UK is changing. Last year, two-thirds (over £4.6 billion) of such investment was recorded outside of the capital.

That is more than 50% higher than investment outside of London in 2015. Six clusters alone attracted nearly £700 million investment between them in 2016: Edinburgh (£159 million) Cambridge (£153 million), Bristol & Bath (£109 million), Oxford (£106 million), Manchester (£78 million), and Sheffield (£61 million). These figures testify to a diversifying investment landscape which, we believe, will provide a boost to regional economies and drive higher productivity across the nation.

However, although the distribution of investment is changing, limited opportunities to access finance remain an issue for a third (32%) of UK digital tech businesses. The issue is particularly pronounced amongst smaller businesses. Over two fifths (44%) of those with fewer than ten employees cite access to finance as a problem.

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17. THE UK DIGITAL TECH COMMUNITY IS UPBEAT ABOUT GROWTH: 75% feel optimistic about their cluster’s growth potential

In our survey, we asked members of each cluster to rate the strength of their local digital tech economy. Just over 50% of them characterised it as ‘strong’.

 

In three clusters, (Bristol & Bath, Bournemouth & Poole and Brighton), this figure rose to around nine in ten people. At the opposite end of the spectrum, the figure fell to between a quarter and a third of those working in Leicester, Birmingham and Southampton.

There was an overwhelmingly positive response when we asked respondents to rate their cluster’s potential for growth

These are reasonably encouraging findings, though they do indicate significant regional variation when it comes to perceptions of the progress made in digital tech. However, optimism for the future is high across the board.

There was an overwhelmingly positive response when we asked respondents to rate their cluster’s potential for growth. Over 75% rated theirs as ‘good’, while just 8% described it as ‘poor’. Those in Cambridge have the sunniest outlook, (95% saying that growth potential is ‘good’), while at 92% the mood is almost as upbeat in Brighton, Leeds and Edinburgh

Get the full Tech Nation 2017 Report

The most comprehensive view of the UK digital tech economy and ecosystem, from Tech City UK.

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