For the last three years, KPMG has been analysing the UK tech sector and publishing quarterly reports on their findings. They can all be read & downloaded from their website. The latest report (Q3 2015) was released today, and this one also contains a special feature that looks at the data geographically to determine the UK’s largest and fastest growing tech clusters.

I’ve been taking a quick look at the very top and bottom of the report – i.e. what their key selected findings are, and what data they have looked at to arrive at them, and thought I’d share it. If you’re interested further, you can download the report and get busy with the meat of it yourself..

So, without any ado, here are the report’s three key takeaways:

“Since the end of the financial crisis, we have seen a UK Tech sector that has delivered six years of continuous growth and created jobs at a faster and higher rate than the rest of the UK economy.”

“…the number of Tech Enterprises has risen by a third since 2010, double the growth for all private sector enterprises and equating to a new Tech enterprise every hour for the last five years.”

“…growth has occurred throughout the UK with some 63 Local Authorities achieving double digit growth since 2014.”

And here are the expanded key findings:

• UK tech sector business activity expanded at a relatively subdued pace in Q3 2015, with the latest growth figure the weakest since early 2013.
• Despite a sustained slowdown in activity growth and softer gains in overall new work, the latest survey highlighted widespread optimism about the year-ahead outlook.
• More than half of the survey panel (54%) anticipate a rise in business activity over the next 12 months, while only 7% forecast a decline.
• Confidence levels were down since Q2, but still stronger than the UK private sector as a whole.
• Tech companies appear to have backed their optimism with sustained job hiring in Q3…
• …with the sector now closing in on six years of sustained employment growth.
• Reading retains its position as the number one UK tech cluster in 2015.
• More than one-in-five enterprises based in Reading are tech sector firms (22%), which is almost three times the national average (8%).
• The M4 corridor continues to host the most concentrated tech clusters, with Wokingham and Slough completing the top three spots in local authority rankings.
• Warwick saw the fastest increase in tech sector enterprises since 2014 (+28%), followed by Hackney (+25%) and Rotherham (+21%).
• Findings suggest that the number of tech-related enterprises in the UK private sector has risen by almost one-third since 2010 (+31.3%).

(Interesting mention of Rotherham there, but we’ll see in a minute why that might be).

So, let’s look at the data they used to derive these insights.

Firstly, the qualitative data – i.e. survey responses regarding business confidence and predictions for the next 12 months, etc. The report uses “a specially selected panel of tech sector executives within the Markit UK Purchasing Managers’ Index® (PMI®) surveys, to provide a unique and up-to-date assessment of the sector’s economic performance.”

The Markit UK PMI surveys are produced for the manufacturing, service and construction industries, and then combined for a whole country view, and divided geographically into regional views. The surveys are conducted monthly among selected panels of senior purchasing executives (or similar) at over 400 companies.

Secondly, the quantitative data – i.e. data on the size, growth & location of the UK’s tech companies. Do do this they use a ‘basket’ of Standard Industrial Classification (SIC) codes, and then run them through the Inter-departmental Business Register (published by the Office of National Statistics) to determine which firms are located in which local authorities. They then use this data to calculate a ‘location quotient’ which gives a comparative measure of cluster size, so they can compare different local authority areas to see which has the most tech firms, or highest growth in tech jobs, etc.

So, I’m sure you’re now dying to know what SIC codes are in the basket!

Well, they have changed what’s in the basket for this quarter, as they’ve realised that ‘tech’ is impacting on lots of other sectors in the economy and can’t easily be pinned down. In fact, they’ve added 11 new codes!

Here’s the list, with the new additions shown with an asterisk:

• Software publishing (SIC 582).
• Computer programming, consultancy and related activities (SIC 620).
• Data processing, hosting and related activities; web portals (SIC 631).
• Manufacture of computer, electronic and optical products (SIC 26).
• Manufacture of electrical equipment (SIC 27).
• Manufacture of air and spacecraft and related machinery (SIC 303)*.
• Manufacture of electrical and electronic equipment for motor vehicles (SIC 2931)*.
• Manufacture of other parts and accessories for motor vehicles (SIC 2932)*.
• Wireless telecommunications activities (SIC 6120)*.
• Satellite telecommunications activities (SIC 6130)*.
• Other telecommunications activities (SIC 6190)*.
• Other financial service activities, except insurance and pension funding, n.e.c. (SIC 6499)*.
• Other information service activities n.e.c. (SIC 6399)*.
• Research and experimental development on biotechnology (SIC 7211)*.
• Other research and experimental development on natural sciences and engineering (SIC 7219)*.
• Engineering design activities for industrial process and production (SIC 71121)*.

As they say:

“While the ‘technology sector’ can be said to span a number of SIC groupings, we estimate that [these] 16 categories represent an accurate bellwether for the footprint of ‘technology enterprises’ within UK local authorities.”

In addition to adding new codes to the ‘tech basket’, they have also re-calculated their growth figures based on the historical data all of those firms, so their employment rate figures, etc are all based on the big basket. And presumably, although I can’t find it mentioned anywhere, KPMG also use this basket to filter responses from the Markit PMI survey data.

So there you have it – buried in this data, and these methodological decisions, is why Rotherham is one of the fastest growing tech sectors in the country, why Reading is the country’s top cluster, and why growth is broadly distributed across the country in some senses, despite most of the report’s top clusters being within an hour’s drive of London.

This is a very quick overview of a 42 page report, and I am not an economist (IANAE!), but hopefully the above provides some insight and opens the findings up to interrogation a little bit.

Comment away, people!