Region in focus: Leeds

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A regional tech hotspot, Leeds boasts an impressive pool of talent feeding into its growing hub of tech start-ups, scale-ups and national and international enterprises – the ideal place to lay roots outside of London.

This region in focus on Leeds has been compiled with expert input from: 

Marc Hutchinson, Corporate Finance Director, M&A 

Marc is responsible for leading Corporate Finance transactions for ambitious and growing businesses to help support growth, fund raising, and key events such as disposals, acquisitions, and full business sales, whether this be through the debt markets, institutional + private equity investment, or corporate/ trade M&A activity. 

 

 

Romane Reeves, Associate Tax Director, BDO Leeds

Romane is Associate Director at BDO's Leeds Office where he specialises in corporation tax, servicing a number of clients from OMBs to large corporates and listed international groups. Romane leads BDO’s R&D tax credit and Patent Box service offerings in Leeds.

 


What’s the tech business landscape like in Leeds?

Outside of London, Leeds is one of the more prominent tech hubs in the UK, driven to some extent by people moving away from the capital. Ex-Londoners are attracted to Yorkshire because of all the green space –there’s fresh air, room to breathe and favourable property prices – resulting in an impressive pool of talent, and in turn, some quite large companies fighting for that talent.

One tech company currently showing fast growth in Leeds is Skybet. Originally part of Sky Group, the international betting and technology company has seen massive growth, with one of its most recent transactions including a merge with Paddy Power. Arguably one of the reasons Skybet has been able to make this leap is because of access to talent. 

But more important for tech, and particularly start-ups, is what this means in terms of what we call the trickle-down or waterfall effect of quality people feeding into other smaller, high-growth firms. Out of Skybet, for example, came a business called Infinity Works, which was established by a group of former Skybet employees. Infinity Works has grown rapidly already, a trend that is only projected to accelerate going forward.

Another good example is a company like First Direct, which is a division of HSBC, but one that is very different to the main brand. The First Direct model is based around offering fantastic customer service and has focused on targeting a much smaller market. It was a risk. But with the right talent on board it became a huge success story locally.

This all-important sharing and distribution of talent can be seen across multiple industries, from finance and banking, to agencies and digital media. Channel 4 is soon to be a big name locally, with new offices set to open in the area – a huge win for the city. And at the end of the day, all of these industries have the potential to feed back into the technology industry. 

What’s the funding and investment landscape like?

When it comes to funding and investment potential, the strength of financial services in Leeds is a huge driver for the technology industry. We’ve got a great selection of legal practices, banking and funding, along with people like ourselves and other accountants. But then, as well traditional banks, you've also got a good representation from newer-to-market debt providers that are able to offer greater flexibility to borrowers. On top of this, there is a very competitive range of private equity funders based locally, alongside a growing list of London-based funds spending more time in the region.

The Northern Powerhouse, for example, has a very regional focus. It seeks to support situations that sit somewhere between debt and the more “traditional” private equity offerings, helping support growth businesses. This is a particularly interesting space for very small and young businesses, who often find it difficult to find these pockets of funding because they’re not quite big enough for your more traditional, mid-market private equity firms or some of the banks who want to see long track records. 

"Government support for tech businesses both locally and nationally is also on hand to support business looking to innovate and create new IP within the UK. In particular , R&D tax credits offer government-funded relief  and additional tax benefits for businesses carrying out innovative development around tech."


This is certainly a way for businesses to monetize their IP that might not be on the balance sheet and is therefore not as visible to more traditional funders. 

Of course, there are other government funding grants from Innovate UK, for example, that aren’t just focused in Leeds and Yorkshire, but available nationally. Patent box regimes provide reduced corporation tax rates for registered patents and profits arising from those.

The biggest challenge with funding, especially for younger, growing businesses, isn’t so much finding it, but navigating the minefield of choices. Banks, funds, equity or grants? There are so many relevant and really interesting routes for technology businesses of all shapes and sizes. But even if people are aware of their options, they may not necessarily understand them, or indeed know how to access them. This can be quite daunting, especially if you've not done it before. 

The world of tech is full of fantastically bright, intelligent people that can come up these brilliant new concepts and ideas. But when they first invent something, it's very important to have everything else around them, talent yes, but also the structure, the strategy and the funding to make the business successful. Hopefully this is where we can be useful to people – guiding them through their options and finding the right and appropriate mechanism to grow their businesses.

What particular benefits does the region offer to tech businesses? 

Leeds is a big draw for a number of people – the university, impressive range of larger business and indeed the location itself. In other local areas you've got Sheffield, which a good hub for educational technology. York likewise has one or two decent sized businesses that pull people in. 

There’s just such a great unit network. Leeds has a number of firms with presence, scale, size and good career paths, and then the bigger groups, especially the international businesses, give you the chance to move beyond the region too. 

But of course, it’s not just about drawing people in, it’s also about holding onto talent once it’s here. Businesses want to find people that will stick around and who they can sculpt and mould. This is especially true for the more creative, diverse and unique businesses. It isn't just a case of taking technology you learn, it’s about finding those people who are inspired enough to develop their own. Those are the people businesses want to keep and retain. Those are the people in the most demand. 

What about the future?

Despite the challenging economic environment, the future is still bright for tech in Leeds. There's probably a very small number of sectors that are still doing well, or who, though not immune to the effects of COVID, are more protected. Luckily, tech is one of these areas. 

Everything is increasingly being driven by technology, particularly during COVID times. Every business, from food and retail, to banking and media, really has to have a big tech consideration otherwise they'll probably fall by the wayside. Those who are the leading the way, will continue to do well. 

Of course, that’s not to say that there won’t be shorter term challenges, especially around access to funding over the coming months, because the appetite from lenders in particular will be restricted. But for the good businesses, they’ll carry on. Maybe not quite as they were, but they'll carry on pretty strongly. And there's a lot of opportunity here. This will shake out some of the more staid and old-fashioned models and people will adapt. 

Take homeworking as an example. The current situation has highlighted how effective homeworking can be. And tech is obviously going to continue to play a huge part in that going forward. It’s those tech companies that can embrace all of this and provide solutions to help businesses work flexibly, that are going to end up in a good place. 

There is little doubt that Leeds is a region that will continue to do well and continue to be a thriving centre for tech businesses throughout the coming year and beyond.

Get in touch

Are you a fast growth tech business leading the way in Leeds? Contact our local teams for insight and advice at [email protected].

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