London is the leading technology and innovation centre in Europe. But will it keep that position after Brexit? And what about the rest of the UK? Will it get left behind, or does the Government have a workable strategy to make sure tech investment benefits the whole of the UK?
The cynical among you may be surprised the Government has time to do anything at the moment, but last week Chancellor Philip Hammond took a few minutes off from the squabbling over Brexit and the burka to announce a £71m investment in technology.
The money is part of an overall £780m investment in technology and innovation, building on an earlier £180m that was given to offshore wind and advanced manufacturing investment in the North East.
So where has the first £71m gone? To London: specifically to the Cell and Gene Therapy Catapult in London’s Guy’s Hospital. Why ‘catapult?’ Catapult Centres are ‘a network of world-leading centres designed to transform the UK’s capability for innovation in specific areas and help drive future economic growth.’
But is it worrying that the initial investment has gone to London, a city which seems capable of attracting more than enough investment of its own? With Brexit now little more than seven months away we look at the latest ‘hot’ cities for tech start-ups and investment and ask if they will still be in the same position this time next year.
London is still the top tech city
It may be fanciful to say – as some British politicians do – that London is a bigger tech hub than Silicon Valley, but it unquestionably remains the leading tech and innovation centre in Europe. In the first half of 2017 private equity investment in the capital’s tech sector totalled £4.5bn, easily outstripping other European cities like Dublin, Berlin and Amsterdam.
“The Brexit vote has understandably created some uncertainty,” said Laura Citron, chief executive of London & Partners, “But London continues to attract more than double the amount [of investment] of any other European city. We have everything we need to be successful: policymakers, finance, infrastructure, world-class universities and talent.”
Is it all about the money?
As we wrote back in February, there is one overwhelming reason why London remains ahead of cities like Paris and Berlin, and that reason is money.
What tech start-ups need more than anything is money – very often, lots of money. And for a millennial entrepreneur who does not have any security that means finding outside investors. UK clearing banks do not lend money against the security of an idea, or an app that has lost £100,000 in its first year of development and now needs another half a million.
Last Autumn we reported on an article about Europe’s tech capitals being ‘Balkanised’ – it rarely crossed political borders. Investors were happy to fund projects in their own countries, but rarely funded projects in other countries. As the article shows, the UK attracts far more overseas tech investment than Germany or France, notably from the US and Asia.
Access to capital is the key reason why London retains its place ahead of other European cities as the number one place to start a tech business. The UK is home to 58,000 technology firms, with a new technology company founded every hour. Perhaps more importantly, London has seen more direct investment in venture capital than Germany, France, Spain and Ireland combined. Foreign investors want to invest in UK technology – London attracts three times more foreign investment than Paris and four times more than Berlin.
Will London retain its position after Brexit?
The UK is due to leave the EU on March 29th next year – although, as we wrote in the July Economic Round Up, do not bet against that date being extended in an attempt to avoid a ‘no deal’ exit. So far, Brexit seems to have had little impact on London’s position as Europe’s leading tech centre. As long as it remains attractive to US and Asian investors – and Brexit will have a minimal impact on their view of London – then London will retain its leading position in the UK.
But what about the rest of the UK?
For me – and I suspect for many people reading this article – that is the key question. It is vital for the long-term economic health of the UK that tech and innovation investment is spread around the country, not just centred in London. But with companies like Google, Amazon and Facebook all establishing new UK HQ buildings in the capital – and HS2 set to make it much quicker to reach London from cities like Leeds and Sheffield – you do worry.
Nevertheless, there are plenty of cities around the UK with successful tech sectors. In no particular order – as the talents shows say – here are half a dozen of them.
Edinburgh – Scotland’s capital has just benefitted from an RBS-funded tech hub and ranks highly for start-ups focusing on the health sector.
Manchester ranks highest for start-ups focusing on the Internet of Things (IoT). This is good news for Cisco which launched an IoT innovation centre in Manchester last year to work on smart-city projects for the future
Glasgow is a larger city than Edinburgh in population terms and – according to the UK Tech Innovation Index – the city ranks third for artificial intelligence investment
Brighton – one of Brighton’s great strength is its proximity to London and it is no surprise that companies looking at a better work/life balance forsake London for the coast. According to Tech City UK, the town has more than 12,000 tech jobs from more than 200 start-ups.
Cambridge – it is no surprise that Cambridge is on the list, given that it is home to one of the world’s best universities. In 2015 the university launched a new centre focusing on AI and ‘the future of humanity’ and also scores highly for manufacturing start-ups.
Birmingham might not be a town that you would immediately associate with tech and innovation, but it has been named as one of the top 5 places in the UK to launch a manufacturing start-up. It also enjoys easy connections to London and scores highly on attracting investment.
Tech and innovation is already making a major contribution to the UK economy. That is only going to increase in the future but – if the sector is really to realise its full potential – it is crucial that the investment is not solely confined to London. Let us hope that future Governments recognise that.