75 per cent of digital tech businesses are outside of London, but what’s driving their success?
The UK’s technology sector is booming. According to the government’s 2016 Tech Nation report, the technology industry grew a third faster than the rest of the economy from 2010-2014. The sector now accounts for 1.56 million jobs, and generated £161bn in 2014.
But while east London’s Silicon Roundabout is best known for its thriving startup scene, the rest of the UK isn’t far behind: 75 per cent of digital tech businesses are outside of London, according to Tech City UK. Startup communities from Brighton to Belfast are growing and generating world-class businesses of their own. In fact, if you want to spot the next British unicorn – businesses valued over $1bn – try looking further afield to Edinburgh or Manchester.
“There are exciting developments going on throughout the UK – from Aberdeen right down to Southampton,” says Sherry Coutu, a serial startup investor and chair of Founders4Schools.
“Many UK cities, including the capital, have the key ingredients in abundance,” says Gerard Grech, chief executive of Tech City UK. “These include talent, smart capital, infrastructure and political leadership.”
But each successful tech cluster is also somewhat unique. Whether it’s access to world-class universities (Cambridge, Oxford), local creative communities (Brighton, Bristol) or a regional specialism (gaming in Dundee; telecoms in Reading), each of the UK’s tech hubs provide unique opportunities for entrepreneurs. Here, we analyse what makes each city click.
The south east (Reading, Brighton, Oxford)
With its world-class transport links, great universities and proximity to London, it’s no surprise the south east is a popular region for new tech startups. There’s something for every type of business.
Like Cambridge, Oxford has a rich history of creating new startups, particularly those tied to the university – computing and health tech are particularly strong sectors in the city. One of its recent success stories, Deepmind, was acquired by Google for a reported £400m in 2014 and now leads the world in artificial intelligence research.
In Brighton, the local thriving creative culture has made the city an attractive place to launch a new business, with local spaces like Makerclub mixing with high-growth companies like Brandwatch, which raised $33m in 2015. Further along the coast, Southhampton is emerging as a home for innovative startups, many involved in the development of the Internet of Things; the local sector boasted an impressive 180 per cent revenue growth from 2010-2014.
Nearby, Reading and the Thames Valley remains a home for large-scale technology businesses, including Microsoft, Oracle and Symantec. However, the proximity to London can have drawbacks for early-stage businesses.
“If you want the honest answer, it’s hard to be a startup here,” says Louize Clarke, founder of local startup network Thames Valley Connect. “There’s a lot of regeneration money in the north. We don’t get the same investments.”
Nevertheless, the level of technology experience in the community and the enthusiasm of local entrepreneurs are driving a small but growing tech sector. “We’re close to Heathrow, close to the coast, close to London. There’s so much potential for really great startups.”
The south west (Bristol, Bath, Exeter)
The south west has long held a thriving tech industry, thanks to its history of aerospace and the creative industries. But new tech businesses are exploding across the region. Turnover in Bristol and Bath grew 53 per cent in 2015, according to Tech City’s Tech Nation 2016 report.
“Bristol is advantageous because it is relatively inexpensive to live and work in but is also well connected,” says Joel Gibbard, CEO and founder of Open Bionics, which has won a James Dyson innovation award and a partnership with Disney. “We also draw on the engineering talent from Bristol's two excellent universities for our workforce with both graduates and interns.”
The real strength of the city and region is the diversity
The local talent – ranging from robotics to cutting edge game development (Bristol hosts the global Virtual Reality World Congress) – has led to a thriving local tech culture.
“The real strength of the city and region is the diversity,” says Nick Sturge, director of Bristol-based co-working space The Engine Shed. “That all makes for a rich and innovative eco-system that leads to all sorts of initiatives such as the Open Programmable City Region project, which creates an ultrafast and data-rich experimental testbed for SMEs and corporates to develop city-wide applications.”
It’s not just Bristol and Bath. Further west, success stories such as crowd-funding platforms Crowdcube (Exeter) and crowdfunder.co.uk (Cornwall) are also becoming established. The latter hints at the two biggest obstacles for local entrepreneurs: lack of national profile, and lack of a nearby investment community. “Both are improving,” says Sturge. And the barriers to entry have created an advantage, he says: “There’s no fluff – businesses that start up here are real businesses that typically sustain.”
Birmingham and the Midlands
The UK’s second city has grown a thriving tech community in recent years. While it may not yet match London or Cambridge, Birmingham is “where startups come to build big businesses, not to be a ‘wantrapreneur’ and get caught up in the noise,” says Simon Jenner, founder of local tech community Silicon Canal. “Smart entrepreneurs know getting your head down and getting on with it is key.”
Nearby, Leicester and Worcester are both also growing. In Worcester, tech employment grew 71 per cent from 2011-2014 – thanks to a growing cyber security scene, influenced by its proximity to GCHQ.
“No eco-system is built in a day, they evolve over decades,” says Jenner. “So we have lots of work to do. It’s not about competing with others, it’s playing to our strengths.”
Wales (Cardiff & Swansea)
Thanks in part to investment by the Welsh government, South Wales has seen promising growth in its tech sector. Local e-commerce businesses, including GoCompare and moneysupermarket.com, are laying the groundwork.
“South Wales' strengths lie in its quality of life – Cardiff often ranks at the very top of UK cities for this – our low cost of living, and access to a young, smart, educated workforce,” says Neil Cocker, founder of startup community Cardiff Start. “On top of that, there are lots of organisations here that are working innovatively with large amounts of data. There are smart, ambitious entrepreneurs building great startups such as Veeqo, Nudjed, Pwinty and Bring-It all, raising seed rounds, increasing their revenues, and pushing their numbers in the right directions.”
However, despite work by the Welsh government, such as Finance Wales Tech Seed Fund, the environment remains difficult for new startups to establish funding and scale. “Wales has an industrial history,” says Cocker. “Therefore there are very few people who can share their knowledge, and enrich the entire ecosystem.”
Cocker, for example, temporarily relocated his company, Ramp, to London to capitalise on an accelerator program. To kickstart real change, Cocker says, “we'll really need one of these local companies to achieve stellar growth as an inspiration to the ecosystem.”
Scotland’s tech sector has been transformed in recent years. Dundee has long boasted a thriving games sector, with Grand Theft Auto creators Rockstar Games leading a successful cluster of developers in the city, fuelled by local talent from Abertay University. Glasgow is also home to a small but growing tech community. But it’s Edinburgh that has seen the biggest explosion – recently the home to not one but two new billion-dollar companies in flights website Skyscanner and gaming startup Fanduel.
We were an internet technology startup in the early part of the millennium. That felt quite lonely. Now it's a very different scene
“We were an internet technology startup in the early part of the millennium in Edinburgh, and sometimes that felt quite lonely,” says Skyscanner CEO Gareth Williams. “Now, it’s a very different scene – Edinburgh is fast becoming a hub for tech firms.”
“The calibre of tech talent is exceptional. We wouldn’t have been able to build such a strong engineering team or core product without it,” says Fanduel CEO Nigel Eccles.
Local investment through organisations, such as the Scottish co-investment fund (which helped support Skyscanner) and incubators such as Codebase, have galvanised local talent. “There’s a very supportive digital community in the city too, with plenty of events, networking and knowledge-sharing opportunities,” says Eccles.
Then there’s the advantages of the Scottish capital. “Edinburgh is a great city to live in. It’s a beautiful place, rich in culture and history, has good travel links to the US”, says Eccles. “It’s also a very easy place to attract visitors to.”
Northern Ireland’s thriving tech centre has been a surprising success story in recent years; in a city more historically known for shipbuilding and aerospace, the sector has become a hot zone of digital startups in ecommerce and SAAS (software as a service) companies. In 2014, 25 companies lead Series A investment rounds of £1m or more.
Local infrastructure, such as the science park and investor networks like HALO, have made the city an exciting place for young businesses such as software company Analytics Engines, and creative innovations – Brewbot, a smartphone-controlled microbrewing device for craft beer enthusiasts, has garnered international attention.
“Belfast is a great location for anyone setting up a new business,” says Jonny Campbell, co-founder of Brewbot. “Businesses can avail of government support from InvestNI. Northern Ireland has low overheads in terms of rent and staffing costs but it also has a large talent pool across many disciplines. And the location is well-connected to Dublin, which is fast-becoming a thriving economy, especially in the tech world.”
East Of England (Cambridge, Norwich, Ipswich)
Cambridge has long been one of the UK’s most dynamic technology centres, having produced 15 billion-dollar companies. The connection with the university and local expertise in deep tech – including artificial intelligence and internet security – have helped attract world-renowned companies like Microsoft, Apple, ARM and Spotify. But the city also produces some of Britain’s most exciting tech companies, such as Raspberry Pi.
Silicon Fen is a hotbed of startup activity, which means local suppliers and contractors are used to the startup model
“We’re in Cambridge because it’s where the talent is,” says Raspberry Pi CEO Eben Upton. The community, Upton says, produces a natural fit for startups. “It’s often being in Cambridge that’s the thing that makes you entrepreneurial.”
“‘Silicon Fen’ is a hotbed of startup activity, which means local suppliers and contractors are used to the startup model, so understand their business needs much better,” says Dave Excell, co-founder of digital security startup Featurespace.
The investment community is particularly strong. “Cambridge is blessed with access to finance because of its proximity to London and the Cambridge Angels who supply pre-seed and seed capital. It also has the university that is prepared to put scale-up funding into its scale up,” says Sherry Coutu, a prolific Cambridge-based investor and chair of the Founders4Schools network.
Its success does offer drawbacks: “Property is not that much cheaper than London,” says Upton. “And the local infrastructure is groaning a bit.”
More affordable bases for new businesses are nearby Norwich and Ipswich, both of which have growing tech sectors. Ipswich in particularly is a focus points for telecoms businesses, with BT’s research park in the area, while Norwich is home to growing startups, such as AI company Rainbird.
“We are very excited about the growth of the digital tech sector in the north, where it has huge potential to help grow GDP and create new high-paying jobs,” says Tech City UK’s Grech. And on this front, the Northern Powerhouse is firing on all cylinders.
“Some London investors are reluctant to journey north but they are failing to take advantage of the huge talent pool, the excellent infrastructure and the lower cost base that all business (and especially growing ones) require,” says Nick Horrocks, a Manchester-based investor at GP Bullhound and co-organiser of the Northern Tech Awards.
Currently there are 11 $1bn tech companies in the north west so it's a proven place for tech
Buzzing hubs have emerged in Leeds – where Google opened its first ever Digital Garage in 2015, supporting over 3,000 businesses. Government funding has been allocated to help encourage the tech sectors in Leeds and Sheffield. The growth in government support, plus growing startup communities – including investors, meet-ups and co-working spaces – are driving the sector in the region. Manchester and Newcastle in particular are home to established investment communities in the tech sector.
“Currently there are 11 $1bn tech companies in the north west so it’s a proven place for tech,” says Horrocks. Among its advantages he cites “extremely well invested infrastructure; low cost of housing; excellent transport connections both in the UK and internationally”.
And pointing to the global context these regional – and national – success stories are operating in, Horrocks adds: “In 2017, Virgin Atlantic will begin flights direct from Manchester to San Francisco – a big boost for local technology businesses.”
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