Why the Next UK Big Digital Startup will Probably not Come from London

The explosive growth of this sector is not confined to giants such as Google and Facebook. It is happening everywhere in companies big and small.

You could easily be forgiven for thinking that the majority of tech businesses in the UK are in London. And perhaps even more specifically, in the so-called 'Silicon Roundabout'.

But this is not the case. For the Tech Nation project, we conducted an in-depth analysis of all registered companies in the UK. We used a huge amount of data, from Companies House financials through to keywords gathered from millions of company websites. We also used third-party data sources such as AngelList, Crunchbase and Wikipedia to get an accurate picture of this fast-moving sector.

There are more than three million active companies in the UK and the analysis identified over 47,000 as tech businesses. Of these, 74% were found to operate outside of the capital. And according to data from Career Builder, 83% of the digital jobs in the UK are outside of inner London.

The explosive growth of this sector is not confined to giants such as Google and Facebook. It is happening everywhere in companies big and small.

But why is this important? Back in 1997, Clayton Christensen published The Innovator's Dilemma and with it gave birth to the theory of disruptive innovation. The years that have followed have seen numerous disruptive businesses emerge. But while some famous ones have come from Silicon Valley, disruptive businesses aren't limited by geography. A study by Atomico found that of the 156 software companies that met the billion-dollar bar, the majority have actually been built outside Silicon Valley, with 63% coming from other cities.

There is no reason why companies from Brighton to Belfast can't be the next Spotify or Skype; both companies had distributed teams early on and were not tied up in one location. The fact is that there are smart people all over the world who have incredibly disruptive ideas and they don't exclusively live in London. Those who make policy need to embrace disruption and support those with the ideas to make it happen, rather than shun it in a luddite fashion.

However, until now, government hasn't had the information required to find those companies nurturing the next big idea. Attempting to map any industry, let alone such a fast moving one, is fraught with complications. The standard toolkit used by government does not provide them with the most accurate and up-to-date data. For example, SIC codes, used by the Office for National Statistics, are broadly not fit for purpose when used in isolation. Nearly a quarter of businesses have SIC codes putting them in the "Other" category. And arguably, the most scalable businesses and those that will be tomorrow's disruptors fall in to this category. This will include businesses in biotechnology, aeronautics and financial services.

Tech Nation is the first prospect list for the government. They can now find where the growth is and nurture it, helping to grow the economy. It is a living index of all of the technology companies in the UK, something which has never been done before, and it will be tracking these companies over time. I predict a very exciting future ahead.


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