Silicon Cities: what do the UK’s tech clusters need from Government?

by Eddie Copeland

This article first appeared on TechCityInsider on 29 May 2014.

The British government has not been immune from admiring glances towards Silicon Valley, nor coy about its aspirations to emulate the region’s success.

At a speech marking the launch of Google Campus in March 2012, George Osborne unequivocally stated his ambition for the UK technology industry, saying: “We want nothing less than to make the UK the technology centre of Europe. This is the path we need to take to create new jobs, new growth and new prosperity in every corner of our country.” In the same address he outlined more than a dozen policy measures designed to nurture the creation and growth of technology companies and tech clusters. They ranged from tax incentives for investors to entrepreneur visas; and from opening government procurement to SMEs, to investing in Catapult Centres.

Two years on, Policy Exchange believes the time is right to review the effectiveness of current measures, and to ask what more needs to be done in order for technology to bring prosperity to “every corner” of the UK. For whilst the government’s ambitions are national, there is a gap between rhetoric and reality. Technology clusters, companies and jobs are disproportionately concentrated in the South East. So what more could be done to promote their growth in other parts of the UK?

Be grateful for what you’ve got

We should start by acknowledging that the UK already has many of the essential policies in place. To name just a few: the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) provide some of the world’s best tax incentives for investors; the patent box enables companies to pay a lower rate of corporation tax on profits earned from patents; there are enterprise zones to attract businesses to specific areas; and Local Enterprise Partnerships to spur regional private sector growth. The list goes on.

What is arguably lacking is not so much the right policies but awareness about them. How many people in the UK realise the options available for investing in British businesses? How many entrepreneurs know about the advantages of protecting their IP? How many businesses realise that they can apply for funding through the regional growth fund, or that they can tender for public sector contracts through G-Cloud? Government should seek to maximise the impact of existing measures by shouting much louder about everything that is already available for the benefit of the UK tech sector.

Know your strengths

Government should also pick up the loudhailer to promote the UK’s regional strengths. It has done much to boost the profile of Tech City, but relatively little to highlight the successes beyond its immediate doorstep. Where are the tributes to Cambridge – Europe’s most successful tech cluster? How often do we hear about Manchester, Salford and Birmingham and their enviable pools of digital media specialists? How many Britons know about the Formula 1 expertise of Oxfordshire and Northamptonshire, which feature several thousand firms which build and restore cars, make engines and components, and provide technical services? And let’s not forget Newcastle, which has a higher proportion of the workforce operating in technology posts than anywhere else in the country. Many more examples could be cited, from Edinburgh to Bristol.

Far too often the UK demonstrates a self-defeating culture of one-upmanship towards other cities, where one’s success is treated as the others’ loss. But there is no zero sum game: instead, we should acknowledge and celebrate each region’s strengths. That does not require ignoring London – it would be mad not to embrace the fact that we have the world’s most global city. But to attract vital foreign direct investment, government should also be telling would-be investors that Britain offers not just London, but clusters of serious expertise well beyond the M25.

The missing pieces

Beyond signposting what’s already there, the number one issue is surely skills. The tech industry may be footloose in terms of natural resources, but its raw material is talent. To be successful, Britain must attract and retain the most talented scientists, engineers, designers and coders. Yet currently we face a chronic shortage of workers with these skills; one million technology jobs need to be filled by 2020. The introduction of Computing into the school curriculum is the long-term answer. But the need is now.

In the near-term, the only practical way to meet the skills needs of our high-tech sector is to look overseas. Yet changes to the UK’s visa regulations have effectively shut the door to many of the best and brightest from around the world, and even to international students who have studied in the UK. As a result, between 2010/11 and 2012/13 the number of (non-EU) international students entering STEM subjects at UK universities fell by 8% for undergraduates and 20% for taught postgraduates. For Computer Science, both undergraduate and taught postgraduate entrants experienced a decline of 38%. Policymakers must understand that individuals with advanced digital skills are in demand around the world. If they are unable to work in Britain, they will simply take their talents and businesses to countries which have more welcoming policies.

Another vital success factor for clusters is breaking down silos. Clusters become more than the sum of their parts when they progress from being just physical concentrations of similar firms to tech communities where entrepreneurs, investors, political leaders, universities and business organisations work together. It is the constant mix of these groups that leads to the serendipitous meetings where ideas are hatched, refined and put into action. It’s where barriers to getting investment are lowered, and obstacles removed. In some cases, government may be able to help by using its power to convene – bringing together key parties and finding ways to incentive their cooperation.

Raising awareness of current policies. Promoting the UK’s strengths. Widening the talent pool. Helping to build tech communities. Through all these measures government could support the growth of tech clusters. Many more will be considered as part of our research. Striking the correct balance between help and hindrance is hard. Getting it right is essential if the government is serious about making the UK the technology centre of Europe.

Follow Eddie Copeland on Twitter @EddieACopeland

You may also like