Tech companies in the North of England have the potential to add £5.7 billion to the UK economy each year if they can bring their productivity up to the national average, according to a report from the Royal Society of Arts (RSA) that was published Monday.
The “Digital Powerhouse” report — paid for by Tech North, a part of taxpayer-funded quango Tech City UK — states that tech companies in the North could significantly boost their productivity if they collaborated better with local industries and public services.
The report claims that local industries in the region — including retail, logistics and manufacturing — are untapped markets for tech firms, as are health, education and local government sectors.
Ben Dellot, a senior researcher at RSA and the lead author of the report, told Business Insider that the cluster of healthcare startups in Leeds could work closer with the NHS, for example, while the cluster of internet of things startups in Liverpool could work more collaboratively with local authorities.
The report gives a number of recommendations for how to improve the amount of collaboration between tech companies, industries, and public services. For example, it recommends “tech taster vouchers” are introduced as a way of allowing businesses to get a taste of what tech could do for their operations. It also suggests looking at ways to make Northern tech clusters proving grounds for experimental technologies and creating a portal that collates private and public sector contracts in one place.
The North of England’s tech sector may lack the unicorns that London has but there is scope for cities like Manchester, Leeds, Sheffield, Liverpool, Newcastle, and Sunderland to do something unique that isn’t all about “celebrity founders, IPO values, and products,” according to Dellot.
Dellot said that cities in the North of England have the opportunity to “pioneer a different way of doing tech” that is more embedded with the local community than traditional tech clusters like Silicon Valley, which could do more for the people of nearby San Francisco in Dellot’s eyes.
“We should try to appreciate the value of SMEs,” said Dellot, adding that the study took around three months to complete. “There are thousands of them across the North. A lot of these tech companies are B2B and operate behind the scenes so we don’t see them.”
How the £5.7 billion figure was reached
In order to measure productivity, the RSA looked at how much value tech workers in different parts of the country add to the overall UK economy. The economic term for this is gross value added (GVA). It essentially boils down to “inputs” minus “outputs.” For example, if a tech worker makes a piece of kit that costs £100 to make, and sells it for £120, then the GVA is £20.
Dellot said his team calculated the £5.7 billion figure by working out the difference between the GVA for tech workers in the North of England (£34,919) and tech workers for the UK as a whole (£50,073). The difference (£20,154) was then multiplied by the number of tech workers in the North of England (283,515) to get £5.7 billion.
When asked why the productivity for tech workers in the north is so low compared to the rest of the country, Dellot said: “I wish I could answer that. I’m really not sure.” He went on to say that improvements to the transportation network and the broadband network would likely help tech companies in the North to close the gap.
James Bedford, head of investment strategy at Tech North, said the report is very much a Tech North initiative that has been supported by Tech City UK, as opposed to the other way round.
Innovation charity Nesta and software supplier Idox also put forward bids to complete the report for Tech North but RSA came out on top. “They were all really strong,” said Bedford.
Neither Tech City UK or the RSA could be drawn on how much the taxpayer-funded report cost.