Bullish UK technology sector worth over £180 billion

The UK technology sector has boomed to a value of more than £180 billion. The explosive growth outpaced the sluggish UK economy as a whole, and will undoubtedly add to the emphasis placed on the tech sector in order to achieve a successful Brexit. However, the sector is not without its problems, and the challenge of a growing talent shortage could hamper Britain’s technology scene in the near future.

With the deadline for Brexit negotiations rapidly approaching, businesses, politicians and citizens alike are still surrounded by uncertainties regarding the UK’s economic and geopolitical future. One aspect of Britain’s withdrawal from the EU that has consistently been talked up as a key pillar of post-Union life is technology.

During the snap general election of 2017, a variety of promises were made by the rival parties vying for power to boost the technological prowess of the UK. Meanwhile the Management Consultancies Association (MCA) published a ‘manifesto’ calling on whoever formed the next government to help the nation to prepare for an ‘educational arms race’, as they contended a successful economy after the completion of Brexit is dependent on a tech-savvy workforce.

Leading firms across the business landscape are also looking to technology to soften the blow restrictions on freedom of movement could have on their access to talent. In the future, Artificial Intelligence may be key to taking up slack, while a new generation of professionals are trained to replace a potential exodus of EU nationals. In line with this, the UK Government’s autumn budget set aside £75 million for the development of AI – as well as funding of 200 new PhD positions in the field. The budget also saw a further £76 million pledged to boost skills in the digital and construction industries. The developments followed recent criticism that most UK secondary schools did not offer a Computer Sciences GCSE.

Encouragingly, the technology sector in the UK appears to be booming at precisely the right time to facilitate this. According to a new report from Tech Nation, in collaboration with EY’s UK and Ireland wing, the UK’s technology sector is now worth nearly £184 billion – up from £170 billion in 2016. Employment in the sector is also high, while new tech hubs are opening across the nation, the 2018 analysis finds.

The UK’s digital technology sector actually grew 2.6 times quicker than the rest of the economy between 2016 and 2017. While UK GDP expansion staggered at around 1.8%, digital tech companies’ turnover grew by 4.5% over the same period. Digital also outperformed the non-digital sector for the fourth consecutive year of the Tech Nation study, something which will make it an increasingly important prop the UK prosperity as a whole, with national growth now at its lowest since 2012.

Commenting on the findings, UK Prime Minister Theresa May said, “As Prime Minister, I am proud of the strengths of the UK tech sector and ambitious for what it can achieve in the future. That is why the government has made tech a core component of our modern industrial strategy, and we will continue to invest in the best innovations and ideas, in the brightest and best talent, and in revolutionary digital infrastructure.”

Talent shortage

London is not surprisingly at the forefront of this bullish performance in the technology sector. The UK’s capital city is ranked as the third top technological ecosystem, behind the famous Silicon Valley and New York. What is notable between these competitors when viewed side by side is that London has a disproportionately large market reach compared to its performance and funding – even while those factors are on the high-side, suggesting that further expansion of the UK’s tech market internationally is more than possible, despite the UK’s declining global influence.

The problem the sector is presently facing is the major obstacle of sourcing talent. Of the other top competitors for the crown of the world’s technology hub, only Tel Aviv has a lower intensity of access to top talent. If London and the UK are to move forward then, this issue is one which cannot be avoided, particularly as the UK faces an ageing population, and a decline in the amount of high-skilled workers arriving from the continent after Brexit – a paradoxical conundrum considering tech firms are also being spoken about as a means for other sectors to offset this issue.

However, the key to tackling this issue may well be that most firms are dangerously lacking in gender diversity, leaving a stunning amount of untapped potential still available for employment in the UK. While the stats were roughly proportional for ethnic minority workers (15 in every hundred tech workers are from this background, compared to 11% of the total workforce) and for staff younger than 35 (28 in 100, while across all UK jobs, 29% are under 35), women were unlikely to be working in the sector.

For every 100 people working in a digital tech job in 2017, just 19 were women despite 49% of the UK workforce being female. By working more concertedly to engage with prospective female workers, technology companies might significantly boost their flagging talent pools, strengthening their position against competitors from across the world. This would not only boost London and the UK to an unassailable advantage over rival economies, but boost the economy as a whole in the process. According to a recent study by PwC, every year the gender pay gap costs the national GDP some £6,300, while business performance on an individual basis could also be boosted by as much as 30% by improving diversity in a traditionally male-dominated sphere.

Gerard Grech, Chief Executive, and Eileen Burbidge, Chair of Tech Nation, commented on the findings of the report, “The UK’s digital economy has seen astonishing growth over recent years. But it has also experienced challenges, some shared by the economy more broadly. Amongst these, of course, is the UK’s changing relationship with the EU. Like the Tech Nation team itself, however, the tech communities we surveyed this year remain resolutely optimistic about the resilience of the UK’s digital ecosystem.”

Concluding, they stated, “As we power into that future, we must support founders, investors, international talent and our homegrown digital workforce. We should continue helping them to connect, learn and share – to ensure the UK remains the best place to start and scale world-class digital businesses.”