Tech Nation Report 2018 continues to map the evolution of the UK tech sector

The Tech Nation 2018 Report is part of a groundbreaking annual series that captures the strength, depth and breadth of digital tech activity in the UK. The first Tech Nation report was published in 2015 to help develop an understanding of the vibrant digital tech landscape in the UK.

This year’s Tech Nation survey received the largest response yet from these members of the UK tech community. In a total of 3,428 submissions, the majority of respondents (33%) were founders and CEOs, followed by workers in tech companies (31%).

Some of the key findings from the report are:

Digital tech expanding 2.6x faster than the rest of the UK economy
Digital tech sector worth nearly £184bn to UK economy, up from £170bn in 2016
The UK has digital suburbs not just cities
Diversity remains a key challenge for digital tech. Ethnic diversity in digital tech jobs is above UK average at 15% vs 10%, yet gender diversity is significantly lower at 19% vs. 49% for all jobs, but both fall short of being representative of the UK population
72% of UK digital tech workers are over 35
London ranks as second most connected place for tech on planet, after Silicon Valley
London beats Silicon Valley when it comes to proportion of overseas customers

Rapid growth

The UK’s digital tech sector continues to grow faster than the rest of the economy. Turnover of digital tech companies grew by 4.5% between 2016-17 compared to UK GDP which grew by 1.7% over the same period.

This means that the tech sector grew at 2.6 times faster than the rest of the economy. At the same time the number of jobs in digital tech rose five times the rate of the rest of the economy, demonstrating how the digital tech sector is one of the best performing sectors in the UK economy.

Record year for acquisition, exits and investment

2017 proved to be an amazing year for the UK digital tech sector with some of the biggest fundraisings and exits seen in years, as international investors flocked to fund UK-based firms. British digital tech companies raised £4.5bn in venture capital investment during the year, according to PitchBook figures, almost double the previous year.

Notable exits for the sector during 2017 included Matchesfashion.com which was sold to a private equity investor for almost £750m and Leeds-based CallCredit acquired by TransUnion for £1 billion. There were also several so called ‘mega funding’ rounds during the year, with game development platform Improbable raising £370m from Japan’s Softbank, food delivery service Deliveroo raising £284m and mobile network Truphone raising £249m. Some of the UK’s fastest growing tech companies include Improbable, Deliveroo, Farfetch, TransferWise, Funding Circle, Revolut, The Hut, Skyscanner, Fanduel, Oxford Nanopore, Benevolent.AI and Darktrace. DeepMind, acquired by Google in 2014, is a global leader in artificial intelligence and still based in London.

In total the UK has seen £42bn venture-backed exits between 2013 and 2017. Companies that have gone from startup to household names, with stock market listings worth billions of pounds in less than a decade, include Just Eat and Zoopla. The purchase of Zoopla by US investor Silver Lake for £2.2bn, announced last week, underlines the success and future potential of the UK’s digital tech businesses.

International competitiveness

The UK tech sector truly shines on the international stage. When we looked at how London weighs up globally, we found that:

A third of London’s businesses have foreign customers, surpassing the 30% of Silicon Valley companies that have overseas customers according to data from Startup Genome
London is the second most connected tech ecosystem globally, behind only Silicon Valley. 25% of the world’s entrepreneurs report a significant relationship with two or more others based in London
The UK is third in the world for total capital invested in digital tech companies, behind the US and China
London startups have the fourth most international workforce in the world. Only Singapore, Berlin and Chicago have a higher proportion of overseas workers.
Digital suburbs, not just cities

The report also reveals the rise of ‘digital suburbs’ and tech towns across the UK where the digital tech sector is growing in urban areas not usually associated with startups and tech businesses. These clusters are attracting more digital tech businesses, which is important for local economies given that the digital tech sector is growing 2.6 times faster than the UK economy.

Diversity remains a challenge

Tech Nation 2018 reveals that the digital tech sector’s workforce is older than commonly perceived and more ethnically mixed than the average UK workplace. Black, Asian and Ethnic Minorities (BAME) account for 15% of digital tech workers. This is significantly higher than the 10% across all UK jobs.

Ethnic diversity is above UK average, yet gender diversity is significantly lower, but both fall short of being representative of the UK population. This reminds us of the importance of taking a nuanced approach to understanding workforce composition, and the need for action.

UK tech community perceptions

In this report, we conducted our biggest ever survey of people in digital tech with 3,428 responses. The qualitative research reveals that entrepreneurs, investors and founders in the tech sector face broadly the same challenges, regardless of their location:

Access to talent is the most common challenge – affecting 83% of clusters
Access to funding is a top 3 challenge in 49% of clusters
Bad transport links are a top 3 challenge in 29% of clusters
UK entrepreneurs are overwhelmingly optimistic about the future of the UK’s digital tech sector:

Over 70% of respondents think the number of digital tech businesses in their local area will rise over the next 12 months
And, over 90% think that the scale of digital tech businesses in their local area will either expand or stay the same
Meetups and emerging tech

The report reveals the ‘hidden underwiring’ that is powering the growth of the digital tech sector across the UK. These informal meetups provide clues to the areas of digital tech that are “hot” right now:

Artificial intelligence is becoming more important – of the top 400 UK tech meetups with the largest membership nearly 16% are related to AI
1.6 million people across the country belong to 3,627 informal tech meetup groups
Analysis of Meetup data reveals that particular cities are quickly developing specialisms eg: blockchain is emerging specialism in Manchester where there were 151 meetups and nearly 62,000 members

Click here to download a copy of the Tech Nation 2018 report.

For further information visit Tech Nation.