By Daniel Hunter
A report from Deloitte reveals that the London technology, media and telecoms (TMT) sector generates an overall economic contribution of £125 billion a year to London and the rest of the UK. This accounts for 8% of UK GDP.
To ensure London remains a global TMT hub, the Government and financial services industry need to support the technology sector with adequate funding to develop companies that can be globally successful.
The sector also needs to drive collaboration between businesses, universities and other institutions, and nurture talent that combines creative and tech skills, to successfully innovate in the digital economy.
The report, London Enabling a World Leading Digital Hub, published alongside EMC, Intel and London First, looks to develop a vision for London’s digital future and exploit its economic contribution.
Overall economic contribution
London is the economic engine for the rest of the UK. The £26bn of direct economic impact (Gross Value Added) generated from the London TMT sector, leads to an additional £23bn of economic impact for London. London TMT activity also leads to £77bn of economic impact for the rest of the UK through the London TMT sector’s purchases and employee spending as well as through the enablement of other sectors within the economy.
Other key findings are:
- Half (46 per cent) of UK media jobs are in London;
- The sector employs over 440,000 people in London;
- One in ten jobs in London are in the TMT sector;
- Over a quarter (28 per cent) of total TMT employment in the UK is in Greater London;
- TMT companies occupy 25 million sq ft of real estate in central London, 13 per cent of office space.
“As this report highlights, London stands out as a global leader in technology, media and communication. This is why Government is investing in initiatives like the £16 million Skills Investment Fund and the £150 million Superconnected Cities program, which will equip our sectors for the future, and continue the valuable fusion of creative and technology skills," Ed Vaizey, Minister for Culture, Communications and Creative Industries, said.
Investment challenges to overcome
The report highlights how the UK financial sector could do more to support the technology sector. It compares UK technology venture capital investment with the US. The estimated value of technology venture capital investment in the UK is one tenth of that in Silicon Valley, taking into account the relative sizes of the UK and US economies.
Organisations interviewed for this study indicated there is a funding gap for UK technology businesses at the “growth” stage of between £500k and £4 million, following the seed and start-up funding stages. The report calls for the funding gap to be filled and for the financial community and entrepreneurs to step up to invest in and develop these companies. In addition the financial services industry should explore options to sharpen the skills to appraise investment opportunities in technology companies, perhaps by building on examples such as the Silicon Valley bank which is importing these skills to London.
Financial services companies should be encouraged to engage with technology risk and take a longer term view of investments. The scope for addressing these challenges is reflected in the average value UK technology deals which is lower in the case of UK bidders (£40 million per deal on average in the last year) than in the US ( £160 million per deal ) and the rest of the EU and Asia (both £110 million per deal).
Jolyon Barker, global lead for Deloitte's Technology, Media and Telecommunications (TMT) industry said: “We need our financial sector to support the technology sector in developing global players.
“London’s TMT sector is an economic engine for the UK. As Tech City attracts inward investment and promotes exports, the wider UK business community should pursue a common objective to lead globally in digital creative product development across media, online games and apps, advertising and platforms, with London as the engine.
“The foundations of London’s digital potential are already in place. The London media and creative industries are a hive of talent and inspiration, producing print, broadcast and online content which are consumed and recognised globally.”
John Dickie, Director of Policy and Strategy, London First said: “It’s clear that the TMT sector has potential to be of tremendous value to London and the UK economy but to realise that we have to make sure the conditions are right for these new businesses to establish themselves and grow. Some of the challenges they face are common to most young business sectors but there are specific elements, such as access to talent and the resilience of the city’s IT infrastructure, that are particularly pertinent. These need to be addressed if the government is serious about making London the European rival to Silicon Valley.”
James Petter, Vice President and Managing Director UK & Ireland, EMC, said: “The report identifies the capital’s many advantages and considers where improvements can be made. While London is well-placed to exploit its status, resources and diversity, there is no guarantee it will achieve its ambitions and there are specific challenges around skills and finance.
“To continue to drive our business, not only do we need technically literate talent to join EMC from college and elsewhere, but also to keep refreshing the business right through the management chain. London is a creative and financial hub that should be seizing its natural competitive advantages. To do this, London needs industry and government to work together to act on the findings of this report, and EMC will be delighted to play its part.”
Martin Curley, VP and Director of Intel Labs Europe said: “The ambition set out in this report is consistent with our initiative, Open Innovation 2.0, which seeks to promote a new innovation model across Europe to create jobs and promote a sustainable economy, by driving effective collaboration between industry, universities and customers, stimulating entrepreneurship, and prioritising innovation that responds to market demand.”
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