Can the tech sector thrive outside London?

An appetite for collaboration is helping clusters across the north of England to flourish – but there are also key issues holding them back

There’s no doubt that London has firmly established itself as a leading digital hub. Last year, the turnover by its digital tech businesses was £64.1bn, the highest of any cluster in the UK, and 40% of new technology startups were based in the capital. Startups and investors work in close proximity, and there’s plenty of advice for ambitious entrepreneurs. “You could go every single night of the week to an event on how to pitch for funding,” says Mike Jackson, entrepreneur success director at Tech Nation, speaking at a recent Guardian roundtable in Liverpool, supported by Cisco.

But London is only part of the UK’s tech story, and the discussion focused on the future of the burgeoning tech scenes in the north of England.

While there are distinct advantages to being based outside the capital (such as a lower cost of living), businesses are still hamstrung by four primary problems, Jackson told participants. These structural weaknesses outside London are:

• Access to capital.
• Access to growth space [not for small startups, but office space for businesses that are growing to 20-, 50-plus employees].
• Access to second-generation mentorship – people who have “done the journey” and are giving back the benefits of their experience to younger tech companies.
• Access to talent, not just developer talent, but CTOs (chief technology officers), CMOs (chief marketing officers), CPO (chief procurement officers).

Jackson suggested a lack of potential investors willing to look too far outside of London was a big problem. “Capital is an issue for almost every [tech] cluster outside London,” he said. David Woods, co-founder and chief operating officer of Liverpool-based LivingLens, a video intelligence platform, agreed, adding that he found investors in London to be less risk averse: “90% of our funding has come from London. We had to go down there to raise money.”

A willingness for schemes and investors alike to think more long-term was also needed, according to venture capital expert Will Clark from Mercia Technologies. “Whether it’s a government-backed scheme or not, it’s got to take a longer-term view,” he said. “One of the most successful businesses that has come out of this region – Blue Prism in Newton Le Willows – took 12 years to come to fruition.”

However, finance isn’t the only issue holding businesses back, according to Ian Finch, co-founder of digital agency Mando and chair of BIMA North West. He said companies in the north were still struggling to make the journey from small startup or sole trader to bigger business, which could partly be down to a lack of second-generation tech entrepreneurs able and willing to pass on the benefits of their experience.

Recruitment, on the other hand, isn’t a challenge, according to Andy Cooper, co-founder of Draw & Code, a tech studio in Liverpool. He said a more affordable lifestyle, including cheaper housing, was attracting tech workers to northern cities. “We don’t have any issue attracting people to the business. Half of our staff come from outside the region, from London or from around the world. If you’re young and you’re in your 20s and in London then it’s a great place to be, but you can’t save any money when you want to start a family, so what do you do then?”

Sarat Pediredla, CEO of Newcastle-based Hedgehog Lab, a tech consultancy, said that there were now “hundreds and hundreds of developers in Leeds” thanks to Sky Bet, whose headquarters are based in the city. However, wage demands are a challenge for northern companies when recruiting senior staff from London. He said: “I remember having interviews for senior leadership team members. Their salary expectation is completely unrealistic for Newcastle. How do you go from a mid-six-figure salary [in London] to a high-five-figure salary in Newcastle? Even though that’s comfortable in a place like Newcastle, there’s that mental block to reducing your wage.”

Employers need to recruit graduates before they move to London, as it’s harder to attract people back once they’ve put down roots elsewhere, said Pediredla.

Some participants argued that being based outside of London makes it easier to collaborate with other businesses. The more “open” northern attitude, and the smaller nature of its towns and cities, gives it a distinct advantage over the capital, said Vimla Appadoo, service designer at FutureGov. “Because there are smaller cities connected across the north of England you get a real sense of community. You get to understand what’s going on across the region. London is too big to get under the skin of that. Across the north you can know all the startups and all the founders, and what the events are – and you can get involved.”

Collaboration has become increasingly important in the tech industry, said Finch. “The only way to deliver value to customers is to do your thing and do it the best in the world. You can’t do multiple things well, so the way digital has gone you have to collaborate. The people who’ve been slow to collaborate are dying off.”

The cornerstone of Liverpool’s digital industries is Baltic Creative, a community interest company founded in 2009 that has become one of the fastest-growing tech clusters in the UK. Managing director Mark Lawler said it was the hub’s “unique proposition” of reinvesting profits back into tenants, their property and the wider sector that had made it such a desirable destination, with a waiting list and 260 enquiries for space there in the past nine months. Lawler is now looking to replicate the model elsewhere in the north-west.

When asked where they saw the tech scene in Liverpool and the north in one year’s time, the panel felt optimistic, although Finch pointed out that the prospect of Brexit was causing “ripple effects” of nervousness. “I see in our customer base procurement cycles taking longer. We’re negotiating a fourth cycle with one of our customers at the minute – they’ve been a customer for 10 years – and the contract has gone from 100 pages to 180. It’s just stuff – GDPR this and commercial risk that. I think business is just more nervous, and when you’re nervous you need to feel safe.”

John Johnson, CTO at Cisco, added: “I’m really positive. We look at investment in the north now it’s increasing at pace, we can see there’s a great future ahead.”