The UK digital technology sector is emerging as a global force.
A record £6.7bn was invested in UK tech firms in 2016, more than any other European country. In contrast, the automotive sector received £1.66bn in investment. This record boom means the sector already accounts for 16 per cent of domestic output compared with 10 per cent for manufacturing and six per cent for construction. At its simplest, tech is our future.
But now is not a time for complacency. The government must turn well-intentioned words into bold action to ensure one of the UK’s fastest-growing sectors can enter a golden age.
The past five years have seen a plethora of government tinkering. But after speaking to hundreds of founders of tech startups across the country, it’s clear to the Coalition for a Digital Economy (Coadec) that significant barriers still exist, and the opportunities of London’s tech scene are not felt across the country.
Global Britain, or global London?
It’s no surprise that London dominates the equity landscape for tech investments. Global competition may be fast rising, but London is second only to the US for global private equity and venture attractiveness and this should be applauded.
But at the domestic level, it’s alarming that Westminster Local Authority alone performs better than 60 per cent of local authorities combined, receiving as many tech investments in 2016 as the 207 worst performing local authorities.
This investment picture cannot be seen in isolation from the chronic low pipeline of Stem (science, technology, engineering and maths) skills. The tech sector relies heavily on a foreign workforce because we do not have enough high-skilled people in this country.
The industries the government has identified as potentially high-growth are also reliant on skills in short supply: artificial intelligence (AI) and robotics are good examples.
It’s estimated that Britain will need 2.8m digitally skilled workers by 2020 to satisfy the UK’s digital potential. Yet England still performs poorly in international comparisons for both Stem and basic numeracy skills, with a heavy concentration of the worst performing local authorities in the North West and the Midlands.
It’s clear the government must take immediate action to step up its support for the digital tech sector if we are to be a Global Britain and not just a Global London.
The first is to move to a system where all 16- to 19-year-olds are expected to study mathematics, usually to a level above GCSE, as is the norm in many other countries.
This should be supported by a large-scale expansion in software developer apprenticeships. Such a change will dramatically boost the talent pipeline in the UK, although this cannot happen overnight. Access to talent is the top concern for founders in the country and we must remain open to high-skilled talent after we leave the EU.
The best way to do this is for the Home Office to create a new six-month visa for high-skilled tech talent, to allow people to enter the UK and seek work for those who: studied at particular top institutions, or pass a standardised, high-level exam in specific programming languages.
The government must also see the decision to leave the EU as an opportunity to deregulate the cumbersome and bureaucratic restrictions of current funding models and commit to slashing red tape.
Until we take measures to attract more private investment to the regions, government funding is often the only option. Either people move to London to access private capital, taking their ideas and talent with them. Or worse, they give up completely.
The government can also use the pooled Local Government Pension Scheme (six wealth funds, each containing at least £25bn of assets) to help channel more finance into high-growth tech firms through smaller ‘Funds of Funds’.
The percentage of startups reaching the growth stage has declined year-on-year since 2011 and we are seeing our brightest startups snapped up by US acquirers.
None of these actions are small. But they are the scale of change required to make a post-Brexit Britain a world leader in this industry of tomorrow.