Tech Nation 2016 – Part 1

Our initial look at the 2016 Tech Nation report - this part covers background, structure and headline figures.

This is going to be the first of several posts about the 2016 Tech Nation report – it’s a big complicated report that uses a lot of different data sources and statistical methods, and therefore requires careful analysis to determine what it means.

To kick off I’m going to top and tail the report – looking at the headline insights and the bottom-line data used to derive them. In subsequent posts I’ll look at specific elements of the report, compare it with other reports on the digital economy and finally take a look at what it all means for Sheffield and the surrounding area.

First, though, a very quick primer to explain what the Tech Nation report is:

The report is produced annually by Tech City UK, and this is the second year they’ve done so. Tech City UK is a publicly-funded organisation, originally set up in 2010 to help develop the technology businesses centred around the so-called ‘Silicon Roundabout’ in East London. It has since expanded its operations to support the digital technology industry across the country, primarily focusing on geographic ‘clusters’ where activity is concentrated. Tech North is the northern branch of Tech City UK, and was established in early 2015.

The data and methodology used in the 2016 report is significantly different to the 2015 edition (and more comprehensive), which makes comparison between them difficult, (if not impossible). Tech City UK has produced this year’s report in partnership with Nesta, which is the UK’s leading innovation charity, and has also involved a host of other data partners to provide additional analysis on specific aspects of the industry, more of which later.

The purpose of the Tech Nation report is to try to get a handle on the UK’s major digital technology clusters and assess their relative size, activity and impact on the nation’s economy.

As is pretty obvious from the above statement, many of the report’s assumptions are contested: what is ‘digital technology’? What is a ‘cluster’? Etc.

Firstly, the report defines a ‘digital tech business’ as a business that:

“…provides a digital technical service / product / platform / hardware, or heavily relies on it, as its primary revenue source.”

Secondly, it uses the distinctions in Nesta’s Dynamic Mapping of the Information Economy Industries report, which was published last year, to distinguish between three different job types within the digital tech industry:

  1. Digital jobs in digital tech industries.
  2. Non-digital jobs in digital tech industries.
  3. Digital jobs in traditional (non-digital tech) industries.

Thirdly, they have identified a total of 27 notable digital tech clusters, across the UK, with some of them representing a larger population than a single city, such as Sheffield & Rotherham, Cardiff & Swansea, etc.

I’ll discuss how they identify and distinguish these things in subsequent posts.

Suffice to say that, while the objects of the report are largely subjective, this doesn’t mean they don’t lend themselves to analysis. Just that it’s essential that we remember how they are defined and how the data is derived.

(It’s a little like Justice Potter Stewart’s famous assertion that while it’s impossible to accurately define pornography, “I know it when I see it” – this isn’t an exact science, people!)

Headlines

Here are some of the top line insights the report offers:

  • The digital tech economy employs around 1.56m people, 41% in traditionally non-digital firms.
  • Between 2011 and 2014, the digital tech industry created new jobs at a rate 2.8 times faster than the rest of the economy.
  • Average wages are 36% higher than the national average, at just under £50k per annum.
  • The digital tech industry had a combined turnover of around £161bn in 2014, and grew 32% faster than the rest of the economy between 2010 and 2014.
  • The digital tech industry contributed £87bn to the UK economy in 2014 (measured as Gross Value Added – GVA), which represents growth of 27% between 2010 and 2014.
  • There are roughly 58,000 active digital tech companies operating in the UK, 25% of these are based in London.
  • More than 80% of the 27 clusters identified by the report showed growth in digital turnover, jobs and advertised salaries.

In addition, the report breaks these figures down and tries to answer some interesting questions, such as:

  • What sub-sectors are tech businesses active in?
  • Which non-digital industries employ the most tech talent?
  • Which industries have now essentially become digital tech industries?
  • How do employers recruit?
  • How do employees acquire their skills?
  • What are the most important factors driving and hindering the success of digital tech firms?

…check the report itself out for this detail.

Clusters

The bulk of the report of course looks at the individual clusters to analyse their characteristics and compare them with each other.

As previously mentioned, 27 clusters are identified – as follows:

East of England

  • Cambridge
  • Ipswich
  • Norwich

London & Southwest

  • Brighton
  • London
  • Oxford
  • Reading & Bracknell
  • Southampton

The Midlands

  • Birmingham
  • Leicester
  • Worcester & Malvern

North of England

  • Hull
  • Leeds
  • Liverpool
  • Manchester
  • Newcastle & Durham
  • Sheffield & Rotherham
  • Sunderland

Northern Ireland

  • Belfast

Scotland

  • Dundee
  • Edinburgh
  • Glasgow

South West

  • Bournemouth & Poole
  • Bristol & Bath
  • Exeter & Newton Abbot
  • Truro, Redruth & Camborne

Wales

  • Cardiff & Swansea

For each of these clusters the report contains headline figures for number of tech jobs, average salary, the proportion of digital firms (digital density), digital GVA, various growth indicators, notable technology sectors the cluster is active in, as well as challenges, benefits, notable institutions and firms, and case studies.

(For those interested, I’ve entered all the basic cluster data into a Google spreadsheet, which you can grab and analyse using your favourite tool. Get it here: http://docs.google.com/spreadsheets/d/1RKZh3-ClhCTEJ40gPmCUfaVQTuKaKZ52YU885x8kPQI/edit?usp=sharing)

Growth

In addition to the data, the report also makes five specific recommendations for developing the digital tech industry further:

  1. Skilling up a digital workforce.
  2. Focus on finance.
  3. Developing the UK’s digital infrastructure.
  4. Cultivating clusters.
  5. Developing data.

There’s much more to be said about these recommendations, but I should say that we at Sheffield Digital broadly agree with them, and are very much involved in developing all five of these areas locally.

Sub-Sectors

Finally, the report also looks in more detail at a number of specific sub-clusters within the digital tech industry, which also serves to further explain the ‘notable sectors’ they have identified within each of the clusters.

The sub-sectors they define are as follows:

  • App & Software Development
  • Cyber Security
  • Data Management & Analytics
  • Digital Advertising & Marketing
  • Digital Media & Entertainment
  • E-commerce & Marketplace
  • EdTech
  • Enterprise Software & Cloud Computing
  • FinTech
  • Gaming
  • Hardware, Devices & Open Source Hardware
  • HealthTech
  • IOT & Connected Devices
  • Online Gambling
  • Social Networks
  • Telecommunications & Networking

There are few interesting things to note about this list. Firstly, Gaming is large enough to be treated separately from Digital Media and Entertainment. Likewise for Online Gambling. Also, Open Source Hardware is associated with Hardware and Devices, but important enough to be mentioned separately, while at the same time not being associated with IOT and Connected Devices. And while there are EdTech, FinTech and HealthTech categories, there are other application areas (such as retail and public sector) that don’t get their own category. But as we said at the top – it’s not an exact science.

Incidentally, the sectors associated with the Sheffield & Rotherham cluster are: E-commerce & Marketplace; Hardware, Devices & Open Source Hardware; App & Software Development; and Enterprise Software & Cloud Computing.

 

So, those are the basics of the report. In Part 2 I’ll be looking at the other end: where all the figures have come from and how they are used…

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