£5.7bn windfall for North’s ‘Digital Powerhouse’ – if it breaks tech cluster mould and goes local

The digital tech industry in the North of England is booming – but better collaboration with local industries and public services is a must if the region’s tech clusters are to thrive, according to new research commissioned by Tech North, part of Tech City UK and published today by the RSA and Impact Hub.

• North’s digital economy creating jobs at 10 times the rate of region’s non-digital sectors
• Region’s digital workers enjoy 60 percent wage premium over counterparts in the rest of the economy
• Better collaboration between tech businesses and surrounding industries and public services would help to create £5.7 billion bonus for the region

The digital tech industry in the North of England is booming – but better collaboration with local industries and public services is a must if the region’s tech clusters are to thrive, according to new research commissioned by Tech North, part of Tech City UK and published today by the RSA and Impact Hub.

The report, The Digital Powerhouse, found that the digital sector is fuelling economic growth in the North. Digital jobs in the region are increasing at ten times the rate of jobs in non-digital sectors, and the productivity of digital workers is 53% higher than that of non-digital workers. This in turn has fed into higher earnings, with digital workers in the North enjoying a 60% wage premium over their counterparts in the rest of the economy.

Among many other highlights, Manchester now has a world-class digital marketing cluster, HealthTech has become a strong suit for Leeds, and Liverpool is building a reputation for expertise in the Internet of Things.

Yet the North’s Digital Powerhouse is still some way from fulfilling its potential. Raising productivity to the national average for tech workers would result in a £5.7 billion increase in GVA for the northern economy. And increasing the rate of digital self-employment in line with the national average would result in over 9,700 more tech founders.

In a bid to strengthen the North’s digital economy, the government and tech advocates have focused their efforts on improving talent, infrastructure, finance and culture. However, The Digital Powerhouse argues that given the successful increase in the number of digital initiatives and companies established in the region recently, closer attention should now also be paid to a fifth condition: the availability of market opportunities. The report authors say that following successful efforts focused on getting tech startups up and running, now is the time to consider how they can subsequently win paying clients and grow.

Local industries in the region – including retail, logistics and manufacturing – constitute lucrative untapped markets for tech firms, as do the health, education and local government sectors. The Digital Powerhouse suggests that the North’s tech companies can play a vital role in helping the region cope with an oncoming wave of ‘digitisation’, where more industries are likely to face the same fate as the media and publishing sectors.

The report highlights several existing examples of local collaboration. In manufacturing, Manchester-based tech company 2M Automation worked with the Nissan car plant in Sunderland to improve operations on its machine conveying system. While in the field of health, Yorkshire-based company Immedicare created a telecare service that links care homes in Airedale with clinicians in the nearby hospital. 

Responding to the report’s findings, James Bedford at Tech North, said:

"Tech North was established by government to support the northern tech clusters and we commissioned this report to highlight the many assets and opportunities for collaboration and growth on our doorstep. We hope this report not only reveals opportunities but also inspires tech companies to forge new paths to unlock new marketplaces.  The Digital Powerhouse argues that by embedding the tech clusters within Northern supply chains they can increase productivity and growth across the wider economy. "

Commenting on The Digital Powerhouse, one of the report’s authors, RSA Associate Director Benedict Dellot, said:

“For many people, the tech industry conjures up images of billion dollar IPOs, celebrity founders and cult brand followings. Our report argues that the North’s tech clusters can pioneer a different way of doing tech. Rather than be isolated and inward-looking, tech businesses should be woven into the fabric of their local communities, supporting them as they seek to navigate their way through a new digital era that will bring tremendous challenges. Whether it is an EdTech company working with local schools to bring e-learning into the classroom, or a data analytics company helping manufacturers improve machine efficiency on the factory floor, the scope for win-win collaborations in the North is vast.”

The Digital Powerhouse finishes with several recommendations to create a more vibrant and collaborative tech ecosystem. This includes introducing ‘tech taster’ vouchers that local SMEs can exchange for tech support, giving them a taste of what tech could do for their business. Another recommendation is to promote the tech-cooperative model, which would see tech workers supporting one another in times of need and coming together to pitch for higher value public contracts.

Other recommendations include:

• Establishing a Digital Powerhouse Contract Portal – A portal could be created that collates private and public sector contracts in one place, establishing a Northern hub of commercial opportunities for tech companies.
• Making the North a test bed for experimental tech – Northern tech clusters should encourage private and public sector organisations to trial pioneering innovations in the region, such as the use of robotics in social care or blockchain technology in welfare payments.
• Encouraging the use of open source software – Partners in the North should champion the use of open source software to enable collaborative innovation, opening software markets up to more local competition.
• Establishing digital immersion events - Public service teams should consider organising events with nearby tech communities in order to share procurement knowledge and better understand local needs and strengths.
• Creating a ‘Procurement Powerhouse’ social enterprise – Northern entrepreneurs should consider creating a social enterprise to link public sector buyers with tech businesses in the region.
• Organising a ‘600 that Share’ movement – The region’s 600 very large businesses should be encouraged to pledge to do more to support their local tech community.
• Pooling the resources of university outreach teams – The outreach teams of Northern universities should consider joining forces to present a single unified offer to local tech businesses.

Notes to Editors

1. For more information, contact RSA Head of Media and Communications Paul Duffy on 020 7451 6893 or 07799 737 970 or paul.duffy@rsa.org.uk
2. For more information on the background to the report, please contact Tech North’s Head of Investment Strategy James Bedford on 07766 403 022 or james@techcityuk.com
3. The calculation for the £5.7bn GVA figure is as follows: Average GVA per tech worker in the North is £34,919, compared with £55,073 for the UK as a whole – a gap of £20,154. Multiplying £20,154 by the number of tech workers in the North – 283,515 – amounts to £5.7bn.
4. The calculation for the 9,700 founders figure is as follows: The current rate of tech self-employment in the North is 0.41%, compared with 0.55% for the rest of the UK. Closing the gap would mean increasing the North’s rate of tech self-employment by 0.14% in a workforce of 6.93 million. This equates to 9,700 extra tech founders.
5. Tech North is a government-backed initiative charged with accelerating the growth of the digital tech sector in the North of England. There’s a thriving tech scene in the North of England and we’re here to shine a light on it, change perceptions, and catalyse the growth of this exciting sector. Our mission is to make sure our Northern tech communities have the information, networks, support and inspiration they need to further the growth and success we’ve seen in recent years. We also want to make sure the wider world knows about the entrepreneurs, companies, innovators and change agents that are reshaping the modern Northern economy through tech and digital media. We aim to achieve this through a series of programmes and activities including Northern Stars, Founders’ Network, a Co-Investment Fund, Trade and Investment, Talent and Skills, and Content. Tech North is part of Tech City UK. Find out more at technorthhq.com
6. Tech City UK is a government-backed organisations charged with accelerating the growth of the digital economy in London and the UK. We focus on areas like digital skills, smart capital investment, infrastructure, international development and leadership. Find out more at: http://www.techcityuk.com
7. Impact Hub is a global network of centres for social innovation and social entrepreneurship. Altogether, the Impact Hub Network has 85 centres across 6 continents, with 13,000 members working at the cutting edge of the impact economy.
8. The mission of the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) is to enrich society through ideas and action. The RSA believes that all human beings have creative capacities that, when understood and supported, can be mobilised to deliver a 21st century enlightenment. The RSA works to bring about the conditions for this change through a diverse, worldwide network of 27,000 Fellow and also by working with institutions and in communities to bring change.