It’s no secret that the UK economy is heavily dependent on London, which accounts for approximately 17% of UK GDP.
Chancellor George Osborne is well aware of London’s dominance and has pledged to create a Northern Powerhouse to help offset the UK’s reliance on its capital.
Part of the plan includes expanding the success of the Tech City cluster in East London to the North of England.
Specifically, the government wants to join up the existing tech ecosystems Manchester, Leeds, Sheffield, Liverpool, Newcastle and Sunderland into one giant tech cluster.
To do this, Deputy Prime Minister Nick Clegg announced in 2014 that the government was setting up a new agency called Tech North and funding it with several million pounds.
Tech North will “bring the pockets of excellence in tech industries from across the North together to form an internationally renowned virtual hub,” the government said at the time of the announcement.
Obviously this will take time and it won’t happen overnight. But over a year has passed since Tech North was announced and yet nearly all of the UK’s largest technology companies, particularly the new generation, are still located in London.
According to data released in June by research firm GP Bullhound, there is only a single billion dollar technology company in the North of England: ao.com. It’s a website that sells fridges and washing machines, so although it’s a successful business, it’s not exactly revolutionary. There’s also enterprise software firm, Sage, in Newcastle, but that’s been around since 1981. London, on the other hand, is home to thirteen tech “unicorns” developing everything from music identification services like Shazam to fintech apps like Transferwise.
There’s no denying that there are exciting technology companies setting up across the North. Peak, for example, is a clever Manchester-based company with a brain-training app that’s underpinned by neuroscience.
But the reality is the majority of companies aren’t scaling to the same size as their London counterparts.
Essentially, London’s tech ecosystem still seems to be miles ahead of that in the North of England.
But according to Claire Braithwaite, head of the Tech North initiative, the “North’s digital economy is booming”.
She wrote an article for London business newspaper City A.M on Wednesday, titled “Forget London: This is the UK’s real Silicon City,” where she argued that the North will rival the South if it gets the infrastructure investment that it requires, without spelling out exactly what infrastructure is needed.
North vs South
So why are Northern tech companies failing to scale to the size of those in the South?
“Network effects” and “access to talent” are key reasons, according to Thomas Forth, founder of digital story telling firm Imactivate and associate at the Open Data Institute in Leeds.
Forth added that “weak institutions and poor infrastructure makes the North’s effective size too small.”
Tim Dempsey, a Manchester-based venture capitalist at Epiphany Capital, didn’t accept that tech startups in the North of England are any smaller than those in London, pointing to Skyscanner, RentalCars.com, and LateRooms. However, Skyscanner is in Scotland, not the North of England, and the other two, while respectable, aren’t billion dollar businesses.
Defending the North of England tech scene, Alex Depledge, a Tech North board member, said: “If you circled back three or four years ago in London we had the exact same thing. You had a couple of maybes like Shazam and Spotify. We were in exactly the same position. Now we look out from this window [at the top of Heron Tower] and I can tell you that six or seven offices of tech companies that are really, really booming.
“Ecosystems take a while to build. Are we going to see results in the next year? We’ll see some grass roots. But it’s going to take two to three years to really take off.
“There is absolutely no geographic reason why the [UK tech] sector needs to be in London. It can be spread throughout the UK and help rebalance the economy.”