UK tech sector and employee salaries booming - but Brexit looms
- Summary:
- The Tech Nation 2017 report from Tech City UK is overwhelmingly positive about the future of the UK digital economy. But the Brexit problem remains.
Launching the report in London this morning, Tech City CEO Gerard Grech, said that it was clear that Britain is “Europe’s digital capital” and that it is “unparalleled in terms of its expertise, investment and value”.
He said:
The estimated economic contribution [of digital] to the UK economy in 2015 was £97 billion. That’s 10% higher than the previous year. And when you look at it across five years, it’s a 30% increase, boosting Britain’s overall productivity. The estimated turnover of Britain’s digital tech industries now stands at an impressive £170 billion. They are now without question critical to the nation’s economic growth.
There are now 1.64 million digital jobs in Britain and the sector is creating them twice as fast as the wider economy. Between 2014 and 2015 the UK tech sector created 85,000 new jobs. Interestingly, 43% work in non-digital tech sectors, like education, transportation and the public sector.
All impressive stuff. Some of the other headline figures include:
- Over the last 5 years (2011-2016), the UK attracted over £28bn of Tech investment, followed by France at £11bn and Germany £9.3bn.
- London attracted £2.2 billion of VC and PE investment in 2016, around £1 billion more than its two closest competitors, Amsterdam (£1.15Bn) and Paris (£1.07Bn).
- London has twice as many Github users (23,265) as Paris (11,990) or Berlin (10,145), with over a quarter of Github users located in the capital. (Github is Europe’s leading open-source platform for developers)
- In 2016, nearly 22,000 Meetups took place in London, nearly three times more than in Berlin (7,963), Amsterdam (7,915) or Paris (7,581)
- Between 2011 and 2015 the number of digital tech jobs across the UK grew by 17 per cent, which is more than twice the eight percent growth seen in non-digital sectors.
- Last year, 68% of UK tech investment was recorded outside London (£4.6bn)
- The number of digital tech businesses that have been started London is up 42 per cent over five years. Meanwhile, in Newcastle the number of new businesses started has leapt by 39 per cent and in Belfast it is 37 per cent.
- Tech jobs offer high salaries. The average advertised salary is now £50,663 compared with £35,155 for the non-digital workforce.
- Digital and tech salaries are on average an impressive 44% higher than those of non-digital jobs.
- The Gross Value Added (Digital Economic Contribution) of a digital tech worker in the UK is now more than twice that of a non-digital worker (£103,000 compared to £50,000).
- There is a significant and growing productivity gap between the digital tech sector and non-digital sectors. Over the last five years, the gap has increased from £48,000 to £53,000.
However, despite the positive headline figures, Grech couldn’t shy away from the fact that digital companies and the tech sector in Britain (which overwhelmingly voted to Remain in the EU Referendum) is cautious about the impact of Brexit - particularly on skills. He said:
The response we got was overwhelmingly positive. There were also some concerns though. Over half of respondents to our survey highlighted the challenge of finding employees with the right skills. Our survey respondents were unequivocal, maintaining strong access to both talent and investment will be crucial to our future success.
We must reassure founders, investors, international and homegrown talent that the UK is, and will remain, the best place to start and scale a world class digital business. When you have an industry that’s growing at such a rate, you have to ensure that you have access to talent from all over the world.
Confidence is key
Joining Grech at the event was Secretary of State for Culture, Media and Sport, Karen Bradley, who welcomed the report, saying that it shows “digital investors have confidence in the whole of the United Kingdom”.
Bradley outlined how the report follows the release of the government’s Digital Strategy, which focused heavily on skills, connectivity and the future role of AI. However, building on an announcement in the Strategy, Bradley used today to announce a new Digital Economy Council that will lead work on its execution. She's aid:
I want to say something more about what we can do to make this country the best in the world for tech. Key to it will be government and the sector working together. In the UK Digital Strategy I announced we could have an industry forum, the digital economy council, which I will chair. The response from industry has been very positive.
The Digital Economy Council will include representatives of scale ups, cyber security companies, academics, representation from the UK regions and key digital stakeholders. We are finalising the membership and look forward to working with many of you on this. It will meet every quarter starting from next month and focus on implementing the Digital Strategy.
It will identify opportunities, set priorities and lead work streams across the seven pillars of the strategy.
However, Bradley too hinted at the need to support talent post-Brexit, focusing on ensuring that digital British businesses have access to the skills they need. She said:
The digital economy will not work for everyone unless they have the right skills. And we are determined to make sure our workforce is equipped with the right skills to allow the digital economy to flourish. So adults in England that lack core digital skills will not have to pay for training. And the new digital skills partnership will address the digital skills gap in a more collaborative way. And so that we have the specialist talent we need, we have introduced coding into the national curriculum.
And we need to attract the best and brightest global talent. So as we negotiate Brexit, the government is absolutely clear that we want a settlement that allows us to attract the brightest and best global talent. This is a strategic priority.
My take
The figures released today by Tech City UK should be very encouraging for the digital sector across Britain. Technology-based jobs and the start-up culture across the UK has come a long way since five or six years ago and good progress has been made - there’s no denying that. However, it also can’t be denied that Brexit throws a spanner in the works. Whilst we have the advantage of a similar culture and the same language as the US, it’s clear that Europe remains a much larger trading bloc, with much clearer prospects. What’s to come of the UK (if there still is a UK), post Brexit? We aren’t yet sure.