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UK tech expands at faster rate than the wider economy
The Tech Nation team have been working hard on this year’s Tech Nation Report over recent months and we’re proud to share it with you today. It has a great heritage – part of a groundbreaking annual series that captures the strength, depth and breadth of digital tech activity in the UK.
The first report was published in 2015 to help develop an understanding of the vibrant digital tech landscape in the UK. The 2018 Report continues to map the evolution of the UK tech sector.
I’d encourage you to explore the connections and collaborations that underpin UK tech, drive ambitious entrepreneurs and power economic growth. You’ll see interactive data visualisations, community insights and founder views here.
Here are some of the key findings from the report:
- Digital tech expanding 2.6x faster than the rest of the UK economy
- Digital tech sector worth nearly £184bn to UK economy, up from £170bn in 2016
- The UK has digital suburbs not just cities
- Diversity remains a key challenge for digital tech. Ethnic diversity in digital tech jobs is above UK average at 15% vs 10%, yet gender diversity is significantly lower at 19% vs. 49% for all jobs, but both fall short of being representative of the UK population
- 72% of UK digital tech workers are over 35
- London ranks as second most connected place for tech on planet, after Silicon Valley
- London beats Silicon Valley when it comes to proportion of overseas customers
The UK’s digital tech sector continues to grow faster than the rest of the economy. Turnover of digital tech companies grew by 4.5% between 2016-17 compared to UK GDP which grew by 1.7% over the same period.
This means that the tech sector grew at 2.6 times faster than the rest of the economy. At the same time the number of jobs in digital tech rose five times the rate of the rest of the economy, demonstrating how the digital tech sector is one of the best performing sectors in the UK economy.
Record year for acquisition, exits and investment
2017 proved to be an amazing year for the UK digital tech sector with some of the biggest fundraisings and exits seen in years, as international investors flocked to fund UK-based firms. British digital tech companies raised £4.5bn in venture capital investment during the year, according to PitchBook figures, almost double the previous year.
Notable exits for the sector during 2017 included Matchesfashion.com which was sold to a private equity investor for almost £750m and Leeds-based CallCredit acquired by TransUnion for £1 billion. There were also several so called ‘mega funding’ rounds during the year, with game development platform Improbable raising £370m from Japan’s Softbank, food delivery service Deliveroo raising £284m and mobile network Truphone raising £249m. Some of the UK’s fastest growing tech companies include Improbable, Deliveroo, Farfetch, TransferWise, Funding Circle, Revolut, The Hut, Skyscanner, Fanduel, Oxford Nanopore, Benevolent.AI and Darktrace. DeepMind, acquired by Google in 2014, is a global leader in artificial intelligence and still based in London.
In total the UK has seen £42bn venture-backed exits between 2013 and 2017. Companies that have gone from startup to household names, with stock market listings worth billions of pounds in less than a decade, include Just Eat and Zoopla. The purchase of Zoopla by US investor Silver Lake for £2.2bn, announced last week, underlines the success and future potential of the UK’s digital tech businesses.
The UK tech sector truly shines on the international stage. When we looked at how London weighs up globally, we found that:
- A third of London’s businesses have foreign customers, surpassing the 30% of Silicon Valley companies that have overseas customers according to data from Startup Genome
- London is the second most connected tech ecosystem globally, behind only Silicon Valley. 25% of the world’s entrepreneurs report a significant relationship with two or more others based in London
- The UK is third in the world for total capital invested in digital tech companies, behind the US and China
- London startups have the fourth most international workforce in the world. Only Singapore, Berlin and Chicago have a higher proportion of overseas workers.
Digital suburbs, not just cities
The report also reveals the rise of ‘digital suburbs’ and tech towns across the UK where the digital tech sector is growing in urban areas not usually associated with startups and tech businesses. These clusters are attracting more digital tech businesses, which is important for local economies given that the digital tech sector is growing 2.6 times faster than the UK economy.
Diversity remains a challenge
Tech Nation 2018 reveals that the digital tech sector’s workforce is older than commonly perceived and more ethnically mixed than the average UK workplace. Black, Asian and Ethnic Minorities (BAME) account for 15% of digital tech workers. This is significantly higher than the 10% across all UK jobs.
Ethnic diversity is above UK average, yet gender diversity is significantly lower, but both fall short of being representative of the UK population. This reminds us of the importance of taking a nuanced approach to understanding workforce composition, and the need for action.
UK tech community perceptions
In this report, we conducted our biggest ever survey of people in digital tech with 3,428 responses. The qualitative research reveals that entrepreneurs, investors and founders in the tech sector face broadly the same challenges, regardless of their location:
- Access to talent is the most common challenge – affecting 83% of clusters
- Access to funding is a top 3 challenge in 49% of clusters
- Bad transport links are a top 3 challenge in 29% of clusters
UK entrepreneurs are overwhelmingly optimistic about the future of the UK’s digital tech sector:
- Over 70% of respondents think the number of digital tech businesses in their local area will rise over the next 12 months
- And, over 90% think that the scale of digital tech businesses in their local area will either expand or stay the same
Meetups and emerging tech
The report reveals the ‘hidden underwiring’ that is powering the growth of the digital tech sector across the UK. These informal meetups provide clues to the areas of digital tech that are “hot” right now:
- Artificial intelligence is becoming more important – of the top 400 UK tech meetups with the largest membership nearly 16% are related to AI
- 1.6 million people across the country belong to 3,627 informal tech meetup groups
- Analysis of Meetup data reveals that particular cities are quickly developing specialisms eg: blockchain is emerging specialism in Manchester where there were 151 meetups and nearly 62,000 members
The Tech Nation Report is now open
Some more great news. All data featured in the 2018 Tech Nation Report is available online for non-commercial use by third parties. The data can be accessed through the data.world platform. If you use the data, please let us know. We would love to showcase your work.
If you’d like know why we are doing this, check out our blog.