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.
Average UK Cluster Performance (2011 – 2015)
|Digital Tech GVA||93%|
|Digital Tech Jobs||93%|
|Digital Tech Productivity||60%|
Source: ABS / BSD, Tech City UK, 2015. Based on turnover per worker (ABS / BSD, 2015)
|Digital Tech Density||Digital Tech Turnover (£bn)||Turnover Growth (2011 -15)||High Growth Businesses|
|Bournemouth & Poole (26%)|
|Bristol & Bath 4.35||Reading
|Bristol & Bath
|Bristol & Bath
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.
|YEAR||GROWTH IN NUMBER OF DIGITAL BUSINESSES||GROWTH IN NUMBER OF NON-DIGITAL BUSINESSES|
Source: BSD, Tech City UK, 2015
|City||Start up birth rate (2011-2015)|
|Cardiff & Swansea||28%|
|Bristol & Bath||23%|
|Truro & Redruth||21%|
|Bournemouth & Poole||16%|
|Worcester & Malvern||11%|
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%.
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.
|TTWA name||PERCENTAGE OF HIGH GROWTH FIRMS (BY TURNOVER, 2014)|
|Bournemouth & Poole||26%|
|Bristol & Bath||17%|
|City||Digital Density (Turnover)|
|Bristol & Bath||4.35|
|Worcester & Malvern||0.69|
|Redruth & Truro||0.44|
|Bournemouth & Poole||0.44|
|Cardiff & Swansea||0.42|
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.
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.
|City||Digital Tech Employment Growth between 2011 – 15|
|Redruth & Truro||61%|
|Bournemouth & Poole||30%|
|Cardiff & Swansea||29%|
|Worcester & Malvern||24%|
Source: BSD, Tech City UK, 2015
|DIGITAL ECONOMIC CONTRIBUTION PER WORKER||NON-DIGITAL ECONOMIC CONTRIBUTION PER WORKER|
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.
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.
|DIGITAL TECH SALARY||NON-DIGITAL TECH SALARY|
Source: Burning Glass, Tech City UK, 2016
|City||Average digital salary|
|Bristol & Bath||£47,207|
|Cardiff & Swansea||£43,286|
|Bournemouth & Poole||£39,700|
|Worcester & Malvern||£36,650|
|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.
The most highly rated cluster for cost of living was Hull. While digital tech salaries are the second lowest of all 30 clusters, earnings there still go further.
In short, 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 or Nottingham than in London, Oxford or Brighton.
|Cardiff & Swansea||4.3|
|Worcester & Malvern||5.8|
|Truro & Redruth||6.6|
|Bournemouth & Poole||6.7|
|Bristol & Bath||6.7|
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.
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.
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.
|NUMBER OF MEETUPS (2016)|
|Bristol & Bath||3909|
|Worcester & Malvern||1899|
|Bournemouth & Poole||1394|
|Cardiff & Swansea||1279|
|Truro & Redruth||711|
Source: Meetup, Tech City UK, 2016
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.
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.
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.
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