THE DIGITAL POWERHOUSE THE INNOVATION POTENTIAL OF TECH CLUSTERS IN THE NORTH MAY 2016 #DigitalPowerhouse How big is the North’s digital economy? £9.9bn GVA The region’s tech businesses produce £9.9bn GVA 283,500The North is home to 5.2% GVA jobs 283,500 tech workers The digital economy accounts for 5.2% of the region’s economic output 18% of the nation’s 18 tech workers are % based in the North Sage UK, based in Newcastle, is one of the few Manchester tech companies is the UK’s in the FTSE 100 largest 82% tech cluster (by employee 1-in-20 of the North’s size) outside workforce is employed of London in the digital economy Why is the North’s digital economy significant? Employment Productivity Pay Digital workers in the North are paid on average 60% more than non-digital workers 10× 4× Median hourly digital wage vs. non-digital wage 28% 3.1% 11.3% 2.5% faster faster £15.00 Liverpool The North’s digital The North’s digital In the last 5 years, Productivity in £9.90 workforce grew by economy is creating the productivity of the the North’s digital 28% in the last jobs at 10 times the digital economy grew sector is growing 5 years, compared rate of the region’s by 11.3%. The figure 4 times faster than with 3.1% for the non-digital sectors was 2.5% for the productivity in £15.50 region’s non-digital non-digital economy the North’s non- Sheffield workforce digital sectors £10.00 The North is on Digital workers in £15.70 course to have the North are 53% 363k 363,000 digital 53% more productive Leeds workers workers by 2020 more than the region’s £10.20 productive non-digital workers What are the North’s tech specialisms? What is a fully charged Digital Powerhouse worth? Connected devices and the Internet of Things Digital advertising and marketing £5.7bn 9,700 E-commerce and marketplaces GVA founders Gaming Raising tech worker Increasing the rate of tech self- productivity in line with the employment in line with the Social networking national average would create rest of the UK would result in an extra £5.7bn in GVA over 9,700 more tech founders Online gambling Analysis by How big is the North’s digital economy? Recommendations £9.9bn GVA The region’s tech businesses produce £9.9bn GVA Introduce Tech Taster vouchers Establish a Digital Powerhouse Champion the tech co-operative model 283,500The North is home to The introduction of vouchers should be Contract Portal Tech co-operatives should be promoted in the 5.2% GVA jobs 283,500 tech workers considered as a way of allowing businesses A portal could be created that collates private and North as a means of helping tech firms band to get a taste of what tech could do for public sector contracts in one place, establishing together and achieve economies of scale The digital economy accounts for their operations a Northern hub of commercial opportunities 5.2% of the region’s economic output 18% of the nation’s 18 tech workers are % based in the North Sage UK, based in Newcastle, is one of the few Manchester tech companies is the UK’s in the FTSE 100 largest 82% tech cluster (by employee 1-in-20 of the North’s Kickstart new corporate-backed accelerators Make the North a testbed for Establish digital immersion events size) outside workforce is employed Northern tech groups, together with Tech experimental tech Public service teams should consider organising of London in the digital economy North, should consider identifying corporates Northern tech clusters should look at ways events with nearby tech communities in order that may be interested in backing tech startup they could be proving grounds for experimental to share procurement knowledge and better accelerators technologies (e.g. the use of robotics in understand local needs and strengths social care or blockchain technology in the welfare system) Why is the North’s digital economy significant? Employment Productivity Pay Digital workers in the North are paid on average 60% more than non-digital workers 10 4 Median hourly digital wage vs. non-digital wage Move towards ‘problem-based’ Open up data on KPIs and procurement Create a ‘Procurement Powerhouse’ × × commissioning results social enterprise 28% 3.1% 11.3% 2.5% £15.00 Public sector commissioners should consider Local authorities and public services should Northern entrepreneurs should consider creating faster faster the benefits of problem-based procurement, consider releasing their data on procurement a social enterprise to link public sector buyers Liverpool The North’s digital The North’s digital In the last 5 years, Productivity in which does not define solutions from the outset history and key performance indicators (KPIs), with tech businesses in the region, providing a £9.90 workforce grew by economy is creating the productivity of the the North’s digital so as to help tech communities understand the sustainable solution to matchmaking 28% in the last jobs at 10 times the digital economy grew sector is growing opportunities available 5 years, compared rate of the region’s by 11.3%. The figure 4 times faster than with 3.1% for the non-digital sectors was 2.5% for the productivity in £15.50 region’s non-digital non-digital economy the North’s non- Sheffield workforce digital sectors £10.00 The North is on Digital workers in £15.70 course to have the North are 53% 363k 363,000 digital 53% more productive Leeds workers workers by 2020 more than the region’s £10.20 Encourage the use of open source software Organise a ‘600 that Share’ movement Establish a ‘Founder of Founders’ award productive non-digital workers Partners in the North should champion the use The region’s 600 very large businesses could A Founder of Founders award could be given to of open source software to enable collaborative be encouraged to pledge to do more to support business owners who do the most to support innovation, opening software markets up to more their local tech community their fellow entrepreneurs local competition What are the North’s tech specialisms? What is a fully charged Digital Powerhouse worth? Connected devices and the Internet of Things Digital advertising and marketing £5.7bn 9,700 E-commerce and marketplaces GVA founders Pool the resources of university outreach Consider a ‘what works’ review of tech Gaming Raising tech worker Increasing the rate of tech self- teams business support productivity in line with the employment in line with the The outreach teams of Northern universities A ‘what works’ review could be undertaken Social networking national average would create rest of the UK would result in should consider joining forces to present to better understand how the region’s business an extra £5.7bn in GVA over 9,700 more tech founders Online gambling a single unified offer to local tech businesses support offer might be improved for tech businesses About the RSA The RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) believes that everyone should have the freedom and power to turn their ideas into reality – we call this the Power to Create. Through our ideas, research and 27,000-strong Fellowship, we seek to realise a society where creative power is distributed, where concentrations of power are confronted, and where creative values are nurtured. The RSA Action and Research Centre combines practical experimentation with rigorous research to achieve these goals. About Tech North Established in 2015, Tech North is a government-funded initiative delivered through Tech City UK. The specific goal of Tech North is to accelerate the development of the North’s digital economy through the promotion and support of digital entrepreneurship. Its remit is to attract talent, entrepreneurs and investment to the North of England, specifi- cally the seven cities of Hull, Leeds, Liverpool, Manchester, Newcastle, Sheffield and Sunderland. Tech North champion initiatives that support the development of the North’s digital economy, working with local and central government to inform policies that help accelerate growth. About Impact Hub Impact Hub is a global network of centres for social innovation and social entrepreneurship. The first Impact Hub opened in London in 2005 – one of 85 Impact Hubs in cities across six continents. Altogether, the Impact Hub Network has over 13,000 members working at the cutting edge of social innovation, social entrepreneurship and the impact economy. By building a network of spaces and communities – collaborative, inspiring, mixed-used, resource-rich and diverse – we have established a locally- rooted, globally-connected ecosystem perfect for the birth, growth and scaling of impact-driven ideas and businesses. 2 The Digital Powerhouse Contents The Vision 7 Private Sector Collaboration 17 Public Sector Collaboration 28 Knowledge Exchange 38 Next Steps 48 Appendix 50 Contents 3 Acknowledgements Special thanks go to everyone that participated in the research, includ- ing the three workshops that were held in Manchester, Leeds and Hull. Our interviewees included Martha Sama, Toby Rhodes, Nigel Lockett, Si Hanson, Hans Moller, Dan Sutch, Colin White, Alasdair Greig, Sarah Clinch, Lee Strafford, Kevin McManus, Volker Hirsch, Ken Swain, Liz Whiteley, Tim Difford, Simon Ho, David Dunn, Alexander Kurukulasuriya, Daniel Saunders, Greg Berry, Nele Kapretz, Leon Reiner, Michael Mellinghoff, Geoff Mamlet, Bianca Oudshoff and Ruben Nieuwenhuis. Thanks must also go to the team at Nesta, Tech City UK, Burning Glass Technologies and GrowthIntel for sharing their data, as well as to James Bedford at Tech North for his invaluable pointers and feedback, and to Claire Braithwaite for her role in initiating the project.