5 regional hotspots for fast-growth tech in the UK

January 2019

The UK’s fast-tech ecosystem is growing exponentially. Though London and the surrounding areas still hold the lead position in terms of digital tech turnover, digital tech company density is spreading throughout several other areas of the country. 

According to the Tech Nation report 2018, several other major metropolises - and some unexpected smaller locations - are moving to the forefront of cutting-edge technology and investment. Here we take a look at five of the most successful tech hubs in the UK...

An illustration of UK Tech Meetups by location, indicating the interest in areas outside of the London market [source: Henri Sorotos, https://data.world/henritechcity/tech-nation-report-2018]

1. Reading & The Thames Valley

What’s the lowdown?
Tech Nation’s 2018 report found that Reading’s tech company density is approximately seven times higher than the national average. Not for nothing has it long been known as ‘the UK’s Silicon Valley’.

‘Reading is the fastest growing region in the UK, growing by about 2.5%, where the rest of the southeast is at about 2%. The national average is less than 2%,’ says Simon Brooker, Audit & Reading Managing Partner for BDO. ‘Last year, we had three times as many SME start-ups than Birmingham and Manchester combined.’

Who’s here?
Current occupants include major league tech firms such as Microsoft, Oracle, Huawei, Cisco Systems and Symantec. The influx of these major tech players has led other businesses to establish themselves in the area, with up-and-comers including Ultima Business Solutions, Pulsant and the Bullitt Group

‘The influence of large tech firms from the US, such as Microsoft and Oracle, draws new businesses to Reading,’ notes Brooker. ‘I think we will continue to improve our tech businesses’ strength over other parts of the country – it’s a self-fulfilling prophecy because similar organisations want to be established near these higher-profile businesses that push innovation so that they can share workforces and recruit from the same pool.’

What’s the appeal?
Reading and the surrounding Thames Valley area have a particular advantage over rivals because of the strength of the location. Close to London, with easy access to airports such as Heathrow and prominent universities, the area is a magnet for talent and investment funding. 

Among the key factors in Reading’s tech pre-eminence, Brooker cites a ‘colossally strong’ SME start-up base, the attraction of a large volume of inbound foreign direct investment through the Heathrow connection, and strong local connectivity.  

What are the main challenges? 
The very cause of Reading’s position as a tech hotspot may also be its main issue. ‘The proximity to London is a double-edged sword,’ acknowledges Brooker. ‘Being close means that it's very easy to get into the London tech scene, but it also means that our skilled workforce is drawn to London as well.’

There’s also the issue of rising house prices. Though Reading offers lower costs in terms of the residential market for tech workers, the average house price was still £300,026 as of March 2018. The cost for many tech start-ups may be too great, leading businesses to seek other, more reasonably priced areas in which to establish themselves.

What next?
At present, Thames Valley tech companies fall largely into sectors such as analytics, software and data-related business, but there is a growing contingent of life science companies, such as Seqirus, a biotech firm specialising in vaccines. This sector could see further growth in the coming years, given the government’s continued support through the Life Sciences Strategy, introduced in 2011

Additionally, Brooker believes that future plans for transport links will further establish the area’s position. ‘The increased connectivity that will come from the Queen Elizabeth line, when completed, will only help to improve Reading’s standing.’

2. Manchester

What’s the lowdown?
Manchester boasts the UK’s fourth largest total digital turnover, coming in at £2.9 billion, with 62,653 digital tech jobs, Tech Nation’s 2018 report found. This puts the city as the largest hotspot outside of London and the Thames Valley area, making it a formidable contender in the tech sector. Tech Track 100, an organisation sponsored by BDO, listed the northwest as the region with the most fast-growth tech company bases outside of London; six of the 11 firms mentioned are based in Manchester, including lifestyle website producers The LADBible Group and peer-to-peer lending platform Assetz Capital.

‘Whilst Manchester is the second biggest tech hub outside London and the Southeast, it’s number one for the Internet of Things, which offers a particular strain of software development,’ says Julien Rye, Audit Partner, BDO Manchester. HE Inventions is a prime example, offering augmented reality and IoT solutions for retailers. 

Who’s here?
‘The key players in Manchester are focused on IoT, security, data analytics and generally IT services, but there are also three $1 billion unicorns based in the Manchester region, namely The Hut, Boohoo and AO,’ says Rye.

Examples of key players include UK Fast, one of the UK’s leading hosting and colocation providers; Godel Technologies, an agile software development expert; AccessPay, a fintech firm that recently secured £2 million in funding; and ANS Group, a rapid-growth managed and private cloud service provider, among many others.

What’s the appeal?
The transformation of Salford Quays into MediaCity, a 200-acre area of the docklands, offered a huge boon to tech firms looking to establish themselves in the city. Billed as ‘an international hub for technology, innovation and creativity’, the area has created a home for fast-growth tech in the area of broadcast media production, animation and gaming tech. 

Rye believes the connectivity of the people and the businesses in Manchester are the main draw for fast-growth tech. ‘The unique feature of the Northwest, and particularly Manchester, is the ability for everybody to connect. Howard Bernstein [former Chief executive of Manchester City Council at Manchester Town Hall] was greatly commended for his pulling together of all the major contributors to the city’s growth: the business community, the universities, and local and central government.’ In 2018, the tech companies in Manchester raised more than £200 million in funding.

What are the main challenges? 
‘Attracting funding, resourcing and training are the main issues that most tech companies are facing now, and it’s particularly true of Manchester,’ says Rye. ‘Though we have a vibrant community in Manchester, it’s difficult to entice traditional sources of finance to back the tech sector. 

‘Traditional UK financiers don’t necessarily wish to take the risk from a funding point of view. It seems to be easier in the US, where investors may take risks and be willing to accept two or three years of substantial losses and cash requirement before they actually see a return on their investment.’

What’s in store?
The city continues to generate interest as a tech hotspot, and to draw interest from large organisations to invest in the area. ‘Amazon has just opened a large office in Manchester, with Vodafone choosing MediaCity as its incubator base for testing 5G,’ notes Rye. 

‘Not only that, Cisco has just launched a new Innovation Hub, a science park called My Idea. The city also has Tech Manchester, a not-for-profit initiative dedicated to supporting the development of technology businesses and raising the profile of the city’s accelerating digital sector. It focuses on connecting technical mentors with early-stage technology businesses, as well as connecting talent with investors. 

‘The city is incredibly nurturing for start-ups and for technological innovation, and will continue to be in future.’

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3. Liverpool

What’s the lowdown?
Tech Nation has predicted that Liverpool will be a significant hub for tech growth, giving it a 79% rating for Tech Sector Growth Potential. The city is making a particular name for itself in experimental technology in the gaming and virtual reality worlds, but is already an established base for fintech companies. 

Who’s here?
‘There’s been a significant uptick in the number of fintech firms, which is a particularly established sector in Liverpool,’ says Mark Sykes, Partner, BDO Liverpool. ‘But there is also growing interest in edtech, which is exploring the provision of educational services via online platforms.’ The movement is garnering significant interest: education software company Collabco gained double-digital revenue growth for its 2017 financial year, and saw sales rise above £1 million.

In terms of newer, more cutting-edge offerings, there are companies such as vTime, a virtual reality tech firm; Swapbots, an AR-enabled gaming service; and Globall Coach, a world-leading animation service, all of which are pushing boundaries for futuristic tech. 

What’s the appeal?
Financial support from major backers, such as Santander through its Incubator, has helped the tech scene to flourish. Liverpool-based financial support has been given by the MSIF Fund, which has offered £158 million to local efforts so far. More broadly, a £556 million boost from Northern Powerhouse has also helped to make Liverpool a hotspot for innovation. 

Learning support, such as that provided by The Studio Liverpool, a digital technology educator, is also driving younger talent to become involved in the tech sector. 

Events are also key for the encouragement of new business development. Events such as Fintech North, a new tech convention for the UK as of 2018, and the Binary Festival, a celebration of all things tech, further underline the city’s commitment to tech innovation. 

The city’s inclusivity is positively impacting businesses outside of the tech sector too, says Sykes. ‘Businesses outside of the tech scene are exploring how they can drive forward their services in terms of maintenance and innovation through technology such as the Internet of Things. This has created new opportunities for technology businesses in the area.’ 

What are the main challenges? 
The main issue for Liverpool-based tech innovators is funding, an issue that is common to the Northwest in general, Sykes comments. ‘The majority of angel investment is in the southeast of England. The reality is, that whilst venture capital will flow around the UK, the VCs themselves are predominantly located in London, making it difficult for Northern businesses to access funding. 

‘The challenge is that there is a lack of funding for the wider northwest in the under £2 million bracket, which is the goal for many tech businesses’ first round of funding.’

What’s in store?
Sykes believes that the quality of the ideas coming from the city’s home-grown businesses will draw further support. ‘London businesses do not flinch at the idea that they may need £1.5 million in funding to get to the next stage of development, whereas businesses in this region are more likely to bootstrap and work with a lower level of funding,’ he says. ‘The goal is to create an environment where ambitious companies have access to funding that will boost growth.’ 

4. Cambridge

What’s the lowdown?
As one third of the so-called Golden Triangle, Cambridge, alongside Oxford and London, forms the backbone of the life science sector in the UK. With £2 billion of funding from the government dedicated to this triangle alone, Cambridge has successfully manifested a burgeoning life science tech scene. According to Tech Nation’s 2018 report, Cambridge saw twice the level of digital tech turnover per staff (£152,000 per member) than the UK average (£99,000), indicating its strength as a tech hotspot. 

BDO managing partner in Cambridge, Gary Hanson, comments that from the early days of One Nucleus offering services across life sciences, the growth in the sector around the city has been impressive, with centres of excellence, hubs and business parks being developed. ‘The Addenbrookes site is attracting significant investment and talent, which will accelerate an already hot market,’ he adds.

Who’s here?
The city is almost unparalleled in the life science sector, due to its strong financial backing. Ieso Digital Health offers online cognitive behaviour therapy, and has been listed in the top 10 of the 2017 Sunday Times’ Fast Track ‘Disruptors to Watch’. Another notable firm is Kymab, an early-stage bioscience enterprise with a goal of improving antibody technology. 

The University of Cambridge has also fuelled the city’s strong reputation as a dependable location for AI and machine learning start-up endeavours. Global leaders Apple, Microsoft and Amazon are already leading the trend in the city, with others sure to follow. Also worth noting is the exponential growth of AI-based cyber defence firm Darktrace, which is worth over $1.65bn (2018). Founded a mere six years ago and already listed on the Tech 100 lists of 2017 and 2018, it is emblematic of the fast-growth tech sector in Cambridge. 

What’s the appeal?
Access to talent from the University of Cambridge is undoubtedly a key selling point for tech businesses seeking to establish themselves in the city. 

The city’s supportive networks also help its status as a tech hub. ‘A plethora of established networking organisations such as Cambridge Network, Cambridge Wireless and Agri-Tech East also provide help and support for growing firms. A strong and supportive network of investors also exists in the region, meaning capital is readily available,’ says Linn Clabburn, Programme Director of the Cambridge Norwich Tech Corridor, a partnership delivering high-value, tech-led economic growth in the Eastern region of the UK. 

The city’s history has also led to its current leadership in the UK’s tech sector. ‘The growth of the original Cambridge Phenomenon in the 1980s means there is now a network of experienced, successful entrepreneurs willing to invest time and money in companies which could become the next Arm, CSR or Deepmind,’ says Clabburn.  

‘With the BDO sponsorship of Tech Track, Fast Track and Profit Track, we have seen large numbers of companies grow, develop and evolve, whether they started out in the Sanger Institute, the University, the technology hubs or the Innovation Centre,’ Hanson explains. ‘The support network around Cambridge is phenomenal, and access to funding has not held back any suitable enterprise.  The recession of 2008 and subsequent years barely dented business across all sectors.’

What are the main challenges? 
Cambridge’s small size and strong business interest has enabled swift growth over the decades, but the influx of corporate interest has led to certain challenges. The existing transport infrastructure is overburdened, and the operational costs of office rental and the expensive housing market take their toll on businesses seeking to be near to industry leaders. 

‘Fast-growth tech companies are increasingly looking beyond the city boundaries,’ notes Clabburn. ‘The uncertainty around Brexit also means strong local supply chains are likely to be increasingly important in future, which is why we are working hard to showcase the opportunities for partnerships and collaborations within the Tech Corridor.’

What’s in store?
‘Cambridge companies are among many in the Tech Corridor tackling the big challenges facing society around the future of food, medicine and mobility,’ says Clabburn. ‘The city’s world-leading life science cluster, home to companies such as AstraZeneca, Illumina and Abcam, coupled with brain power of researchers at Cambridge University, mean biotech and medtech companies are always likely to thrive in the city.’

‘Cambridge is a magnet for every area of business, and the professional advisers and banks create a particularly well-networked and connected community. It complements the serial entrepreneurs, angels, family offices and spinouts from the University and the alumni of the Judge business school. Outstanding individuals, such as Goncalo de Vasconcelos and Tom Britton at Syndicate Room; Jonathan Reynolds and Ben Medlock at Swiftkey; and many others have seen their ideas evolve and accelerate. This will continue as we all reinvest in our businesses and share knowledge, skills and experience,’ Hanson says.

5. Birmingham

What’s the lowdown?
An average of over 500 tech start-ups are founded annually in Birmingham, according to Tech Nation, with the rise showing no sign of stopping. The Centre of Entrepreneurs records that 12,108 businesses were launched in the city in 2017, with Birmingham frequently named as the location with the highest number of new UK start-ups outside of London. Digital tech businesses in the city hit a remarkable turnover of £2.2bn in the same year, making Birmingham a force to be reckoned with in the UK tech sector. 

‘With high property prices and rising staff costs in London and the South East, Birmingham and the wider Midlands are a very attractive prospect for tech start-ups, drawing more people from London than anywhere else in the UK,’ says Gary Rouse, Director of BDO Birmingham. ‘With its central location, 18 universities within easy reach, and good transport links via motorway, rail and airports, many see Birmingham and the wider Midlands as great places to establish tech businesses.’

The tech ecosystem across the Midlands is flourishing and continues to grow.  Birmingham alone has more than 41,500 digital tech jobs according to Tech Nation’s recent figures. ‘There are a significant amount of tech incubators and accelerators across the region, giving excellent access to likeminded individuals in an environment where they can flourish with the right support,’ adds Rouse.

Who’s there?
Health tech companies are surging in the area, with leading examples including Eyoto, (formerly Aston EyeTech), a developer of proprietary AI-based, Cloud-connected hardware and software products for ocular health, and Kaido, a health insights platform that uses artificial intelligence to inform best practice healthcare. Fintech is also well-represented, with companies such as Oxygen Finance, an early payment provider, offering innovation in digital financial processes. 

What’s the appeal?
With three universities offering fresh talent, innovation is poised to thrive. McGuire says: ‘Birmingham is the second most populous city in the UK, and has a surplus pool of talent,’ says David H. McGuire, IoT investor and advisor to Stellar Motors, Saudi Arabia’s first autonomous vehicle company. ‘However, it still has an undersupplied start-up scene, allowing start-ups to benefit by hiring the best.’

The city’s networks and ‘enterprise zones’ allow for the fertilisation of new tech. Silicon Canal, which aims to create a ‘world-class tech ecosystem’ in the city, as well as digital campus Innovation Birmingham, are two examples of tech hubs in the city. Monetary support for start-up funding and private equity from local organisations such as Finance Birmingham have helped to foster ingenuity in tech. 

‘Birmingham was once an industrial beacon of England; however, now it has become a predominantly service-based centre, supporting the back offices of numerous blue-chip companies,’ says McGuire. ‘The area offers a cosmopolitan environment, strategically located in the middle of England, with the ability to attract Northerners and Southerners to a somewhat middle ground, making it appealing for new businesses.’

What are the main challenges? 

Much like Manchester and Liverpool, the lack of venture capital backing and private equity investment in areas outside of London has hampered progress.  Recently there have been a number of funds launched in the Midlands. For example, the £250 million Midlands Engine Investment Fund launched in March 2018.  This should help with funding but Tech businesses are still finding it challenging to know what funding is available for them, and how they can go about accessing it whilst still driving their business forward.

‘The challenge is keeping up with the pace of growth,’ explains Rouse. ‘Tech companies are constantly looking for resource across all areas, and even though Birmingham is a big city with a big catchment area, it means that tech companies are under resourced.’

What’s in store?
As London-based banks seek new locations for their back offices, the fintech scene in Birmingham will thrive, argues McGuire. ‘The surge of highly qualified financial and fintech talent will foster and attract innovation and opportunities that will manifest in the start-up scene.’ Rouse explains: ‘HSBC and Deutsche Bank have recently relocated to Birmingham from London, and this investment and relocation into the wider region is expected to continue demonstrating the significant advantages there are for tech businesses in the region.’

Additionally, there are serious contenders in the artificial intelligence and IoT spaces that do not need to be based in the capital to thrive. ‘They can take advantage of the lower costs of business in the area as they develop heavily research-based products. Birmingham will benefit from the growth of start-ups that don’t feel the need to be in the capital, such as SaaS, science-based, and research start-ups,’ McGuire says. 

‘Birmingham will soon attract the attention of more VCs and angel investors looking to snap up innovative and scalable start-ups, with the lower costs of business and lower costs of living for employees attracting local, national and international talent to the area.’ 

Future Stars

BDO is sponsoring Tech Nation’s Rising Stars programme, which seeks out and rewards innovation from early-stage tech start-ups. The initiative encourages applications from all over the UK, and could herald the new wave of tech hotspots around the nation. 


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