Alexey Brin - Fotolia

Tech City UK report trumpets nation’s digital economy

In its third TechNation report, Tech City UK says the nation leads the way in digital innovation across Europe

Tech City UK, a government-supported body that promotes the country’s technology sector, has issued its third TechNation report, saying the UK is at the forefront of digital innovation.

The report found the country’s digital economy to be growing twice as fast as the wider economy, with a turnover of £170bn in 2015. The report uses standard industrial classification (SIC) codes to define “digital industries” as those that involve the manufacture of technology hardware and software, and the provision of tech services.

The report received 2,700 submissions, “roughly half from CEOs”, according to its authors. The collective annual turnover of what the report calls “digital tech industries” was £170bn in 2015, and £6.8bn was invested by private equity (PE) firms and venture capitalists (VCs) in UK technology companies in 2016 – twice as much as closest competitor, France, with £2.4bn.

Nevertheless, as the report states, in 2016, the overall number of VC and PE-backed startup deals declined across the 10 largest European digital tech hubs, and digital tech investment was 34% lower than in 2015.

The significant weight of non-UK citizens in the digital economy, pre-Brexit, is evident from the report: 31% in London and the south-east, 13% overall.

The UK boasts 40% of Europe’s top 20 universities, notes the report, basing itself on Times Higher Education World Varsity Rankings, 2016-17.

The report also notes, however, that in a YouGov survey of 1,000 academics published earlier this year, over 44% said they know colleagues who have lost access to research funding as a direct result of last summer’s EU referendum vote.

Read more about Tech City

While the UK and France have Europe’s greatest proportion of “millennials” with science, technology, engineering and maths (Stem) degrees (0.58% of UK residents aged 20 to 29 have one), the report says a “shortfall of Stem graduates is a challenge across the continent, where Stem entry requirements and drop-out rates tend to be high, and participation by women in particular is low”.

The report finds the UK to be well represented on the open source development platform Github. London has 23,265 users of the platform, Paris 11,990, and Berlin 10,145. London also has three times more “Meetups” than other European cities.

Tech sector outperforming overall economy

The report breaks down its statistics on a city-by-city basis. London leads the way, with turnover of £56bn. Reading follows, with £12.5bn, then Bristol and Bath at £8.1bn, with Manchester and Cambridge in much the same bracket at £2.9bn and £2.1bn respectively.

The report says the UK’s digital tech sector grew 50% faster than the economy as a whole in 2015 (4.8% versus 3.2%), and it profiles 30 digital tech clusters across the UK.

Outside of London, it notes almost 40% growth of new digital businesses in Newcastle and Belfast over a five-year period (39% and 37% respectively). It also registers “impressive increases in percentage terms [of new jobs created] in Dundee, Redruth and Truro, and Sunderland” between 2011 and 2015 (67%, 61% and 49% respectively).

“The UK is at the forefront of digital innovation. With the digital economy growing twice as fast as the wider economy, it is clear that as a nation we have the culture, talent and skills that is driving this thriving sector”
Scot Gardner, Cisco UK & Ireland

Looking to the future, the report found an “overwhelmingly positive response” when respondents were asked to rate their cluster’s potential for growth. Over 75% rated theirs as “good”, while just 8% described it as “poor”. Those in Cambridge were found to have “the sunniest outlook”, with 95% describing growth potential as “good”. At 92%, the mood was found to almost as upbeat in Brighton, Leeds and Edinburgh.

Prime minister Theresa May said, in a foreword to the report: “I am determined that we … seize the opportunities that arise from leaving the EU and seek to build a bold new future for our country. That is why support for the digital tech sector is an important element of the government’s modern industrial strategy.”

Welcoming the report, Scot Gardner, CEO at Cisco UK & Ireland, said: “Today’s TechNation report demonstrates that the UK is at the forefront of digital innovation. With the digital economy growing twice as fast as the wider economy, it is clear that as a nation we have the culture, talent and skills that are driving this thriving sector.

“By capitalising on the government’s digital strategy, investing in our networks, supporting the roll-out of 5G and encouraging young people into the latest digital careers, we can inspire the next generation of tech innovators and attract talent from across the globe, foster investment and work towards a future that has digital at its heart.”

Read more on IT innovation, research and development