Growth of the UK’s digital tech sector

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

85,000 more digital tech jobs in UK compared to 2 years ago, growing from 1.56 million to 1.64 million

 

The growth rate of digital jobs was more than double that of non-digital jobs between 2011 and 2015. Furthermore, these jobs are highly skilled and highly paid, contributing to the productivity and growth of the wider economy.

Year Number of Digital Tech Jobs (Millions)
2014 1.56mm
2015 1.64mm

Source: BSD, Tech City UK, 2015

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

YEAR GROWTH IN TURNOVER (DIGITAL)
2011 139
2012 150
2013 157
2014 161
2015 170

Source: BSD, Tech City UK, 2015

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YEAR GROWTH IN TURNOVER DIGITAL BUSINESSES GROWTH IN TURNOVER NON-DIGITAL BUSINESSES
2011 4.4% 1%
2012 8% 5%
2013 4.6% 4%
2014 3% 5%
2015 5% 3%

Source: BSD, Tech City UK, 2015

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In 2015, the GVA (Economic Contribution) of the digital tech sector reached £97 billion, with a growth rate of 30%

YEAR GROWTH IN GVA (DIGITAL) GROWTH IN GVA (NON-DIGITAL)
2011 10.1% 2.3%
2012 2.6% 2.58%
2013 5.86% 5.16%
2014 9.4% 10%
2015 9.38% 3.6%

Source: BSD, Tech City UK, 2015

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YEAR GROWTH IN GVA (DIGITAL)
2011 74
2012 76
2013 81
2014 89
2015 97

Source: BSD, Tech City UK, 2015

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UK tech businesses are growing 2X faster than non digital businesses

Over a 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.

 

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

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London, Belfast and Edinburgh see fastest growth rates for number of new digital tech businesses

 

In terms of sheer number of new digital tech businesses emerging London has seen the strongest growth, up by 42% in five years.

Belfast, Edinburgh and Newcastle have seen almost as impressive growth figures over this period, at 37% and 34% respectively.

What’s more, in 13 of our 30 clusters the quantity of digital tech businesses has increased by more than a quarter.

City Business Growth (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%

Source: BSD, Tech City UK, 2015

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Digital tech businesses created twice as fast as non-digital, In London, a new tech business is born every hour, at 8,472 in 2015

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%.

City BIRTH RATE (2011-2015)
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%
Middlesbrough 15.1%
Nottingham 14.6%
Reading 14.6%
Cardiff & Swansea 14.6%
Belfast 14.3%
Leicester 14.1%
Sheffield 13.4%
Hull 13.1%
Southampton 12.4%
Bournemouth & Poole 12.2%
Norwich 12.2%
Bristol & Bath 12.2%
Cambridge 12.1%
Exeter 12.1%
Oxford 12%
Brighton 11.8%
Redruth & Truro 11.6%
Dundee 11.5%
Ipswich 11.4%
Plymouth 11.4%
Worcester & Malvern 8.9%

Source: BSD, Tech City UK, 2015

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High growth companies are nearly twice as prevalent in the digital tech sector compared to non digital tech

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%

Source: BSD, Tech City UK, 2015

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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.

Reading has the highest concentration of digital tech businesses followed by Bristol and Cambridge

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.

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

Source: BSD, Tech City UK, 2015

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