UK digital sector expanding three times faster than economy

UK digital sector expanding three times faster than economy

A new report from Tech Nation reveals a wealth of good news for the UK technology sector amidst the Brexit gloom, reports Chris Middleton. However, there is more to the results than meets the eye, and several good reasons not to relax, he says.

The UK’s technology sector is expanding 2.6 times faster than the rest of the economy, says a new report. According to the latest annual survey from entrepreneur network Tech Nation, the turnover of digital technology companies increased year on year by 4.5 percent in 2017, compared with GDP growth of 1.7 percent over the same period.

PwC has projected reduced GDP growth for the UK of 1.5 percent this year.

The digital sector is worth nearly £184 billion to the UK, up from £170 billion in 2016 – which is actually an increase in total value of 8.2 percent, according to Internet of Business’ own calculations. At the same time, the number of roles in digital technology rose at five times the rate of the jobs created elsewhere in the economy, claims Tech Nation.

More good news – except for women

The report contains more good news for the British government, which has recently positioned artificial intelligence (AI) as a core component of the economy via the new Office for AI, and the new Sector Deal announced last month.

Diversity in the digital sector is improving: more black, Asian, and other ethnic minority workers are employed in technology than across the UK on average: 15 percent against 10 percent for the rest of the economy. If correct, the figures are encouraging, as just 13 percent of the UK population belongs to ethnic minorities, according to the government’s own statistics.

Nearly three-quarters of the UK’s digital workers (72 percent) are over 35, says Tech Nation. However, only 19 percent of the tech workforce is female, compared to 49 percent across all UK jobs, so technology remains a strongly male-dominated profession.

At UK Robotics Week last year, UK-RAS – the UK’s umbrella organisation for robotics and autonomous systems research – said that just 17 percent of all workers across science, technology, engineering, and maths (STEM) careers are women, while a senior academic speaking at a London forum on AI ethics earlier this year suggested that only 10 percent of coders are women.

Clearly, much more needs to be done to encourage women to enter the profession, and that movement needs to start in schools.

This morning, enterprise cloud platform Salesforce.com added to the debate with a survey of its own, revealing that 37 percent of workers in the UK believe they might not be able to get a job in future if they don’t acquire technology skills, while nearly one-third of people in middle management roles said they were never taught technology skills at school or college. Over half of UK adults believe diverse teams are more likely to bring fresh ideas to a business, found Salesforce.com.

Funding manoeuvres

British technology startups raised £4.5 billion in venture capital investment during 2017, according to Tech Nation, almost double the sums raised in the previous year. This places the UK third in the global league of total capital invested in digital companies, behind the US and China, it says.

Notable exits for investors in the sector during 2017 included Matchesfashion.com, which was sold to a private equity investor for almost £750 million, and Leeds-based CallCredit, acquired by TransUnion for £1 billion.

Meanwhile, games development platform Improbable raised £370 million from Japan’s SoftBank, food delivery service Deliveroo raised £284 million, and mobile network Truphone attracted £249 million in VC investment.

Deliveroo founder Will Shu said, “Deliveroo was started in Britain, grew from Britain, and London remains our global HQ. It’s here that we build the technology that allows us to deliver millions of orders around the world. And without the talent, creativity, and expertise of the people who work here, none of that would be possible.”

Towers of London

London ranks as the “second most connected place for technology on the planet” (see graphic, above) after Silicon Valley, claims the report. Earlier this year, Mayor of London Sadiq Khan launched a new programme to make the capital the epicentre of AI development in the UK.

Aside from London and Manchester, eight other cities show above average levels of technology employment, says Tech Nation. These are: Portsmouth; Bristol; Bath; Cambridge; Southampton; Oxford, York; and Salisbury.

Most of these host major universities, while Bristol is also home to a number of large technology companies, smart city initiatives, a new AR/VR research lab, and 5G programmes. As reported in Internet of Business, Liverpool is another emerging hotspot, via its Sensor City facility.

Several other big towns also have higher levels of technology employment than the rest of the country, says Tech Nation, suggesting that they could be fertile breeding grounds for startups. These are: Newbury; Reading – home to numerous big names; Basingstoke; Burnley; Slough and Heathrow; Livingston; Stevenage; Welwyn Garden City; Guildford; Aldershot; High Wycombe; Aylesbury; Southend; Enniskillen; Telford; Cheltenham; Stafford; Huntingdon; and Swindon. Several are in the so-called ‘Heathrow corridor’ to the West of London.

Transport is certainly a factor, according to the report. Tech Nation surveyed over 3,400 technology professionals, entrepreneurs, and investors, and found that most face the same major challenges, regardless of their location: access to talent and funding, and poor transport and infrastructure links.

The Brexit factor

The 2018 report appears with Brexit looming on the horizon and widespread uncertainty about what form it will take – not to mention about its lasting economic impact. However, Tech Nation reports that the only places in which Brexit is cited as a top-three business challenge are Cambridge and London.

Despite this, its impact should not be understated. In March, another report on the UK’s technology sector found that 43 percent of all so-called Industry 4.0 jobs (roles in robotics, AI, automation, big data analytics, 3D printing, and the IoT) are in London, versus just two percent in Manchester and Bristol, and one percent in Edinburgh.

More, that report revealed that many Industry 4.0 professionals are working for a small number of major companies, mostly in the capital, such as Accenture, Google, IBM, Microsoft, Deloitte, PwC, KPMG, Boston Consulting Group, and EY.

So identifying Brexit as a major problem in London is, statistically, highly significant for the UK’s technology sector, especially when combined with Cambridge, another of the country’s digital hotspots and centres of research excellence.

Despite this, technology communities across the UK remain highly optimistic about the growth prospects for digital companies: over 70 percent of respondents think the number of digital businesses in their local area will rise over the next 12 months, according to Tech Nation.

Digital Secretary Matt Hancock welcomed the report, saying, “Tech Nation 2018 not only highlights the underlying strength of our digital economy, but also emphasises its huge potential.

“Our world-leading tech firms are growing fast and creating the high-skilled, high-paying jobs of the future. They are a hotbed of innovation, creativity, and entrepreneurial spirit. This is a huge success story, and we are working hard to make sure the benefits of digital technology reach every corner of the country as we build a Britain that is fit for the future.”

Internet of Business says

The good news is certainly encouraging, and the Tech Nation report is unusual in that it take more of a bottom-up view of the sector than many, revealing that 1.6 million people across the country belong to 3,627 informal tech meet-up groups.

Among these, AI is of rising importance, while blockchain is emerging as a key specialism in Manchester, for example, where the report finds that there were 151 meet-ups and nearly 62,000 members alone last year.

Yet despite all the good news, it’s useful to set the Tech Nation report alongside the March 2018 report from i-AMdigital, a new organisation that focuses on Industry 4.0 technologies. It found that despite the prevalence of skilled and highly qualified professionals in robotics, AI, analytics, and the IoT, the UK’s technology sector is overwhelmingly focused on sales and marketing.

Nearly one-third (31 percent) of the entire Industry 4.0 workforce is in business development and sales positions – in roles such as IIoT or big data sales managers – versus just five percent in research and development.

Over one-quarter of those sales professionals want to change jobs, it found, while 31 percent of the UK’s researchers are actively looking for new opportunities too. The report implied that the marketers may find it much easier to do that than the researchers.

So while the UK’s technology sector may be booming in relative terms, and while Britain continues to produce ambitious entrepreneurs – as it has always done – much of the current boom is still centred on London, where Brexit is seen as a serious problem, and much of it is concentrated in large consultancies, systems integrators, and US technology vendors.

Worse, the majority of activity in the sectors that the UK has identified as being critical to its economic prosperity, such as robotics and AI, is in sales and marketing, and not where it needs to be: R&D.

Chris Middleton
Chris Middleton is former editor of Internet of Business, and now a key contributor to the title. He specialises in robotics, AI, the IoT, blockchain, and technology strategy. He is also former editor of Computing, Computer Business Review, and Professional Outsourcing, among others, and is a contributing editor to Diginomica, Computing, and Hack & Craft News. Over the years, he has also written for Computer Weekly, The Guardian, The Times, PC World, I-CIO, V3, The Inquirer, and Blockchain News, among many others. He is an acknowledged robotics expert who has appeared on BBC TV and radio, ITN, and Talk Radio, and is probably the only tech journalist in the UK to own a number of humanoid robots, which he hires out to events, exhibitions, universities, and schools. Chris has also chaired conferences on robotics, AI, IoT investment, digital marketing, blockchain, and space technologies, and has spoken at numerous other events.