UK tech sector growing 2.6 times faster than overall economy

The UK technology sector is growing more than two-and-a-half times faster than the overall economy and London has been ranked as the second most connected place for tech in the world behind Silicon Valley in the US.

According to the Tech Nation Report 2018, the UK digital tech sector is worth nearly £184bn to the economy, a rise from £170bn in 2016. The turnover of digital technology companies grew by 4.5% between 2016 and 2017, compared with 1.7% growth in UK GDP.

The report said the UK ranked third in the world for total capital invested in digital tech companies, behind the US and China. Some of the UK’s fastest growing tech companies include Improbable, Deliveroo, Farfetch, TransferWise, Funding Circle, Revolut and Darktrace.

And it is not just London that is benefiting. There are 16 towns in the UK with higher levels of tech employment as a proportion of employment. These include Livingston, Reading, Burnley, Enniskillen and Swindon. But the UK capital was one of only two European cities that made it into the global top 10 in terms of digital tech ecosystems; the other was Berlin.

Gerard Grech, CEO of Tech Nation, said this was the first major milestone for Tech Nation.

“The UK’s tech sector is growing almost three times faster than the rest of the economy. What started as Tech City is increasingly Tech Nation. London is the world’s second most connected hub after Silicon Valley. We need to make the most of that, as our new relationship with the EU will undoubtedly force us to be even more adaptive, innovative and ambitious,” he said.

Matt Hancock, the UK’s digital secretary, said the report highlighted the underlying strength of the UK digital economy and emphasised 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,” he said.

As part of the report, Tech Nation surveyed almost 3,500 people. It revealed the main challenges they face, with access to talent the most common, affecting 83% of tech hubs. Access to funding and poor transport links were also found to be major challenges for some of the UK’s tech hubs.

But many in the UK digital tech sector are concerned that leaving the EU will do lasting damage to the UK tech sector unless the right trading relationship with the EU is struck. But this is looking less and less likely as a result of government infighting, which has seen little progress towards a deal.

On Brexit, the survey revealed that companies outside the capital and Cambridge, which historically have relied less heavily on overseas talent to fill job vacancies, are less concerned about Brexit. But London is the engine for UK digital tech industries. London-based startups have the fourth most international workforce in the world, with only Singapore, Berlin and Chicago having a higher proportion of overseas workers.

Another challenge facing the industry is in recruiting more women. While the proportion of tech jobs held by people of black, Asian and ethnic minority backgrounds (15%) is higher than the figure for total UK jobs, only 19% are filled by women, compared with 49% of all UK jobs.

The report said UK entrepreneurs were optimistic about the future of the UK’s digital tech sector, with 70% of respondents expecting the number of digital tech businesses in their local area to rise over the next 12 months. Nine out of 10 expected the scale of digital tech businesses in their local area to either expand or stay the same.

Eileen Burbidge, partner at Passion Capital and chair of Tech Nation, said: “From fintech to healthtech, self-driving cars and artificial intelligence, the UK’s digital tech sector is having an impact on every aspect of our daily lives and economy. Tech Nation’s survey of the industry shows that confidence and optimism is high, but it is important for us to keep supporting this sector and give British companies the best chance they can to grow and scale.”