Data and research

We need to talk about Northern productivity

Community, Data & research

Henri Egle SorotosHenri Egle Sorotos, February 19, 2018

This article was originally posted on the Tech North website.

As a resident of the North of England, I am fiercely proud of the wealth of tech across the region. But there is no denying the productivity elephant in the room…

Once again, I’ve been spending time in the ONS Secure Research Service interrogating the Business Structure Database (BSD) for the upcoming 2018 Tech Nation Report. Most of us have heard about the productivity crisis – it’s the subject of many newspaper columns, photocopier chat and dinner table conversations. I find it a fascinating subject to explore – yes, I’m a geek.

Using the BSD, I’ve been able to get a proxy for productivity in digital tech – turnover per employee. Whilst this isn’t a perfect measure of productivity, it’s certainly a metric that industry often relies upon to measure the efficiency of each worker in a given economy. The cartogram in figure 1 gives you an idea of the spread of tech productivity across the UK by Travel to Work Area (TTWA).

Thames Valley – the UK’s silicon?

When I first produced the above output my mouth dropped – the results are startling. In Bristol, a digital tech worker can expect to generate more than £200k additional turnover every year than the equivalent Manchester based employee. That’s a three times productiveness differential between Mancunian and Bristolian workers of digital tech firms. Bristol isn’t on its own – there is an entire ‘productivity powerhouse’ from London to the mouth of the River Severn along the M4 corridor. This area of high efficiency also spreads down to Southampton and Portsmouth, with Heathrow at the epicentre of all things productive in tech.

The North’s productivity is not at the same level, in fact it’s not even close. York is the only standout TTWA where each digital tech workers is accumulating ~£188k revenue per annum. By contrast, the usual ‘go-to’ areas of Northern economic might appear distinctly average. Manchester TTWA workers in digital tech companies make only £104.5k every year. This is lower than Birmingham and Sheffield. Liverpool and Leeds fare even worse. Northern tech employees make in average £38k less revenue per annum compared to those in the rest of the country.

Figures 2 and 3 are of the same visualisation but with a focus on the North and the rough South East of the UK.

Stuart Clarke, director of the annual Leeds Digital Festival, commented on the wide productivity gap across the North:

We have standout startups and big unicorns, but it would be interesting to see the comparison with other industries. We still have companies that are having to move to London to take investment. Highlighting the tech and startups that we’ve got will stop the flow of companies to the South and increase productivity.

Outside of the tech sector, Clarke highlights the lack of transport links as a key stifler reducing productivity of the wider economy:

Where we are struggling across Leeds is with transport. If employees are taking an hour and a half to get to work on a bus, then productivity if going to suffer. It’s indicative of the lack of leadership in the Leeds city region and the LEP.

Some caveats

As with all data, we need to take the findings with a few pinches of salt. First – turnover per employee is only a proxy for productivity. There are likely to be other variables that will alter turnover per employee figures. For instance, a certain sector may dominate the tech industry in certain areas. Certain sectors require higher or lower head counts. Additionally, many companies now choose to offshore development. This can affect the turnover per employee figures.

Stay tuned for the full analysis in this year’s Tech Nation Report, and do join the conversation on twitter.