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London digital sector continues to grow faster than rest of UK

The gap between the number of digital tech firms in London and the rest of the UK is growing

London is adding digital businesses at a faster rate than the rest of the UK and accounts for double the amount of tech companies than the rest of the nation combined.

According to analysis of National Statistics data carried out by law firm Nockolds, the number of digital companies in London increased by 10.6% in 2016 compared with the previous year, reaching 46,405.

Meanwhile, the rest of the UK also increased the number of digital businesses with a 7.7% boost, taking the total to 23,345.

Scotland was the fastest growing region outside London with an 8.8% increase in the number of digital business, which now stands at 8,555.

Nicola Lucas, associate at Nockolds, said the digital economy is a UK success story but the gap between London and the rest of the country is widening.

“Digital businesses benefit from clustering, so this process could accelerate as growing numbers of digital businesses feel that they need to be in the capital where the tech talent and related infrastructure is based,” she said.

Lucas said there are advantages for early stage startups to be outside London, at least initially. “For startups, the relatively low cost of being based in regional cities can make an important difference in the critical early years,” she said.

But she added: “As business grow, the benefits of being close to peers and talent in London often outweighs the cost saving of being in a regional city where attracting staff can be a headache.”

Read more about UK tech industry

In a few years’ time, London might not be the main competition for UK regions attempting to attract digital startups, withBerlin, Stockholm, Helsinki and Dublin being possible threats.

Research from Tech London Advocates, a network of 4,600 tech experts, found that 29% do not think London will be the favoured place in Europe to make tech investments over the next five years. Uncertainty is already making it harder to attract investment in London tech, and things are going to get worse, the survey found.

A total of 39% of respondents said it is harder now to raise money for tech in London than it was a year ago, and 61% think it will be even harder because of Brexit.

But despite fears over Brexit, London is still seen as the place to be in Europe for people developing digital technologies for the finance sector.

Research from German recruitment website Joblift shows there has been, on average, a 5% increase in financial technology (fintech) jobs in the UK every month from April 2016 to April 2017, with London accounting for the most.

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