THE DIGITAL
POWERHOUSE
THE INNOVATION POTENTIAL OF
TECH CLUSTERS IN THE NORTH
MAY 2016
#DigitalPowerhouse
Employment
18% of the nation’s
tech workers are
based in the North
1-in-20 of the North’s
workforce is employed
in the digital economy
283,500
How big is the North’s digital economy?
Why is the North’s digital economy significant?
What are the North’s tech specialisms?
What is a fully charged Digital Powerhouse
worth?
more
productive
Productivity
Pay
The region’s tech businesses
produce £9.9bn GVA
Raising tech worker
productivity in line with the
national average would create
an extra £5.7bn in GVA
Increasing the rate of tech self-
employment in line with the
rest of the UK would result in
over 9,700 more tech founders
The North’s digital
workforce grew by
28% in the last
5 years, compared
with 3.1% for the
region’s non-digital
workforce
Connected devices and the Internet of Things
Digital advertising and marketing
E-commerce and marketplaces
Gaming
Social networking
Online gambling
The North’s digital
economy is creating
jobs at 10 times the
rate of the region’s
non-digital sectors
Productivity in
the North’s digital
sector is growing
4 times faster than
productivity in
the North’s non-
digital sectors
Digital workers in
the North are 53%
more productive
than the region’s
non-digital workers
In the last 5 years,
the productivity of the
digital economy grew
by 11.3%. The figure
was 2.5% for the
non-digital economy
Manchester
is the UK’s
largest
tech cluster
(by employee
size) outside
of London
Sage UK, based
in Newcastle,
is one of the few
tech companies
in the FTSE 100
The North is home to
283,500 tech workers
The digital economy accounts for
5.2% of the region’s economic output
£9.9bn GVA
£5.7bn 9,700
5.2% GVA
faster
faster
jobs
4×
10×
53%
18%
82%
3.1%
2.5%
28%
11.3%
Digital workers in the North are paid on average
60% more than non-digital workers
Liverpool
Sheffield
Leeds
Median hourly digital wage vs. non-digital wage
£15.00
£15.50
£15.70
£9.90
£10.00
£10.20
founders
GVA
workers
The North is on
course to have
363,000 digital
workers by 2020
363k
Analysis by
Employment
18% of the nation’s
tech workers are
based in the North
1-in-20 of the North’s
workforce is employed
in the digital economy
283,500
How big is the North’s digital economy?
Why is the North’s digital economy significant?
What are the North’s tech specialisms?
What is a fully charged Digital Powerhouse
worth?
more
productive
Productivity
Pay
The region’s tech businesses
produce £9.9bn GVA
Raising tech worker
productivity in line with the
national average would create
an extra £5.7bn in GVA
Increasing the rate of tech self-
employment in line with the
rest of the UK would result in
over 9,700 more tech founders
The North’s digital
workforce grew by
28% in the last
5 years, compared
with 3.1% for the
region’s non-digital
workforce
Connected devices and the Internet of Things
Digital advertising and marketing
E-commerce and marketplaces
Gaming
Social networking
Online gambling
The North’s digital
economy is creating
jobs at 10 times the
rate of the region’s
non-digital sectors
Productivity in
the North’s digital
sector is growing
4 times faster than
productivity in
the North’s non-
digital sectors
Digital workers in
the North are 53%
more productive
than the region’s
non-digital workers
In the last 5 years,
the productivity of the
digital economy grew
by 11.3%. The figure
was 2.5% for the
non-digital economy
Manchester
is the UK’s
largest
tech cluster
(by employee
size) outside
of London
Sage UK, based
in Newcastle,
is one of the few
tech companies
in the FTSE 100
The North is home to
283,500 tech workers
The digital economy accounts for
5.2% of the region’s economic output
£9.9bn GVA
£5.7bn 9,700
5.2% GVA
faster
faster
jobs
4×
10×
53%
18%
82%
3.1%
2.5%
28%
11.3%
Digital workers in the North are paid on average
60% more than non-digital workers
Liverpool
Sheffield
Leeds
Median hourly digital wage vs. non-digital wage
£15.00
£15.50
£15.70
£9.90
£10.00
£10.20
founders
GVA
workers
The North is on
course to have
363,000 digital
workers by 2020
363k
Introduce Tech Taster vouchers
The introduction of vouchers should be
considered as a way of allowing businesses
to get a taste of what tech could do for
their operations
Kickstart new corporate-backed accelerators
Northern tech groups, together with Tech
North, should consider identifying corporates
that may be interested in backing tech startup
accelerators
Move towards ‘problem-based’
commissioning
Public sector commissioners should consider
the benefits of problem-based procurement,
which does not define solutions from the outset
Encourage the use of open source software
Partners in the North should champion the use
of open source software to enable collaborative
innovation, opening software markets up to more
local competition
Establish a ‘Founder of Founders’ award
A Founder of Founders award could be given to
business owners who do the most to support
their fellow entrepreneurs
Establish a Digital Powerhouse
Contract Portal
A portal could be created that collates private and
public sector contracts in one place, establishing
a Northern hub of commercial opportunities
Make the North a testbed for
experimental tech
Northern tech clusters should look at ways
they could be proving grounds for experimental
technologies (e.g. the use of robotics in
social care or blockchain technology in the
welfare system)
Open up data on KPIs and procurement
results
Local authorities and public services should
consider releasing their data on procurement
history and key performance indicators (KPIs),
so as to help tech communities understand the
opportunities available
Pool the resources of university outreach
teams
The outreach teams of Northern universities
should consider joining forces to present
a single unified offer to local tech businesses
Champion the tech co-operative model
Tech co-operatives should be promoted in the
North as a means of helping tech firms band
together and achieve economies of scale
Establish digital immersion events
Public service teams should consider organising
events with nearby tech communities in order
to share procurement knowledge and better
understand local needs and strengths
Create a ‘Procurement Powerhouse’
social enterprise
Northern entrepreneurs should consider creating
a social enterprise to link public sector buyers
with tech businesses in the region, providing a
sustainable solution to matchmaking
Organise a ‘600 that Share’ movement
The region’s 600 very large businesses could
be encouraged to pledge to do more to support
their local tech community
Consider a ‘what works’ review of tech
business support
A ‘what works’ review could be undertaken
to better understand how the region’s business
support offer might be improved for tech
businesses
Recommendations
The Digital Powerhouse
2
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.
3
Contents
Contents
The Vision
7
Private Sector Collaboration
17
Public Sector Collaboration
28
Knowledge Exchange
38
Next Steps
48
Appendix
50
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.
Research team: Benedict Dellot, Fabian Wallace-Stephens, Rowan Conway,
Jack Robson, Clare Devaney, Jonathan Schifferes, Alberto Masetti-
Zannini, Alex Soskin, Eleanor Whitley and Howard Reed.
For more information about the report and our research, please contact
Benedict Dellot at benedict.dellot@rsa.org.uk, or James Bedford from
Tech North at james@techcityuk.com
The definitions and part of the data and analysis documented in
this report are based on Nesta’s seminal work in Tech Nation 2016,
undertaken in partnership with Tech City UK.
For more information about their study, please contact Juan Mateos-
Garcia at juan.mateos-garcia@nesta.org.uk
Research partners:
About Tech City UK
Tech City UK is a government-backed organisation charged with
accelerating the growth of the digital economy in London and the UK.
We focus on areas like digital skills, smart capital investment, infrastruc-
ture, international development and leadership.
5
Forewords
Forewords
The North of England, long famous for its industrial might and entrepre-
neurial drive, is now being recognised for its creative clout and innovative
thinking. These attributes explain the recent surge in growth in the tech
communities across the North, from Newcastle to Manchester, from
Liverpool to the Tees Valley.
This Government is determined to rebalance the economy by building
a Northern Powerhouse. That is why we have tasked Tech North with
unleashing the potential of Northern tech clusters using a £2m annual
budget from Government to deliver initiatives such as Northern Stars
and Founders Network.
We have also given £11m to local authorities in Manchester, Leeds
and Sheffield to support the development of Northern tech businesses.
These grants will be used to help nurture start-ups, foster collaboration,
and provide mentoring, learning and business support.
But, as The Digital Powerhouse report sets out, there is much more
to be done. There are huge opportunities for tech companies to grow:
devolution, smart cities, big data, and the corporate supply chains which
depend on new products to remain competitive and prosper. The potential
is huge.
This report identifies strong tech clusters in the North and sets out
the importance of tech collaboration to economic growth. It highlights
opportunities and threats for Northern entrepreneurs and tech companies
and gives useful examples of how barriers to growth have previously
been overcome.
Tech will not be considered a separate sector for long. It is already at
the centre of our lives and is an integral part of the Northern economy.
It is increasing the efficiency of industry, closing the gap between custom-
ers and business, and transforming data into products.
Starting a tech business could be considered an act of innovation
in itself; indeed creativity is a theme which runs through The Digital
Powerhouse report. We know that tech businesses can help drive innova-
tion throughout the wider economy, and for them to recognise their
maximum potential fresh new methods of collaboration must be used.
Tech North has worked with the RSA (Royal Society for the encour-
agement of Arts, Manufactures and Commerce) and the Impact Hub
network to deliver this valuable report. It is leading the way in showing
that the North is filled with opportunity and innovation. Now our superb
digital companies must take the opportunity to drive the growth which
underpins the Northern – and increasingly Digital – Powerhouse.
By working with these dynamic digital entrepreneurs, who are creating
growth in their local economies, we will continue to make the North an
even greater place to work, live and invest in.
Ed Vaizey
Digital Economy Minister
James Wharton
Northern Powerhouse Minister
The Digital Powerhouse
6
It is with genuine excitement when we speak of or hear about initiatives
boosting the Northern Powerhouse, the push to drive growth and pro-
ductivity in the world-famous Northern cities of England. This Digital
Powerhouse report highlights what a crucial component and role ‘digital’
plays to that growth and how the North has, in abundance, the assets,
ambition and opportunities to fuel the value creation of the Northern
tech clusters.
This report maps out how the North can better engage with its tech
clusters, drawing on respective expertise and innovation in order to
provide solutions for smart cities and digitise industry strengths. A North
that is fully leveraging its tech clusters can help create new products and
services that will lead to new jobs, increased productivity and new busi-
nesses. Establishing, expanding and realising these market opportunities
will help Northern companies remain competitive and efficient – further
attracting even more investment and greater value for the region.
Tech North was established by government and Tech City UK to
accelerate the potential of the Northern tech clusters. This report
shines a brilliant light on all the assets and opportunities already un-
derway which serve as a foundation for the growth of the new Digital
Northern Powerhouse.
Welcome to The Digital Powerhouse, a report from Tech North, in part-
nership with the RSA and the Impact Hub network. We commissioned
the report to investigate the opportunities that exist for the North’s digital
tech sector which we believe is key to the success of the Northern
Powerhouse.
The Digital Powerhouse report demonstrates how the North can
grow its economy by better connecting its growing tech clusters with
its own market opportunities, with government devolution, digitisation
of services, corporate need for disruptive tech and the power of data all
examined.
We’ve been delighted by the input we’ve received from across the
North. Through roundtables and interviews, we’ve been able to incorpo-
rate ideas and insights which form the report’s backbone.
What’s clear is that new thinking is required to make best use of the
tech cluster expertise, assets and opportunities here in the North, and
we hope this report acts as a catalyst for this.
Herb Kim
Executive Chair, Tech North
Eileen Burbidge
Chair, Tech City UK and
Partner, Passion Capital
7
The Vision
The Vision
Introducing the Digital Powerhouse
The North’s digital economy is thriving. Today the region is home to
seven of the UK’s 27 key tech clusters, each of which boast pioneering
businesses, ambitious founders and accomplished innovators – all of
whom Tech North was established to support. The proliferation of
accelerators, co-working spaces, meetup groups and community events
is testament to the North’s enthusiasm for the digital economy, and to the
widespread belief that there are better things to come. From the launch of
the C4DI co-working space in Hull, to the expansion of Newcastle’s well-
regarded Ignite accelerator programme, through to the continued success
of Liverpool’s Baltic Triangle, this is the story of a ‘Digital Powerhouse’
in the making.
What does this mean in economic terms? The region’s tech businesses
produce £9.9bn in Gross Value Added (GVA), amounting to 5.2 percent
of the North’s total economic output.1 Over 280,000 tech workers are
employed either in tech businesses or traditional industries, the equivalent
to one in 20 of the workforce.2 The significance of the North’s tech
scene becomes more apparent when set against the picture for the UK
as a whole. Eighteen percent of the nation’s tech workers are based here,
and the largest tech cluster outside of London (by employee size) is in
Manchester.3 Sage UK, based in Newcastle, is one of only a handful
of technology companies in the FTSE 100.
Northern cities are making particular headway in several subsectors
of the digital economy. Manchester has a world-class digital advertising
cluster, Hull is building up its expertise in e-commerce, and Liverpool
is foremost among UK cities for connected devices and the Internet of
Things. HealthTech has become a strong suit for Leeds, software is a spe-
ciality for Sunderland, and there is a notable grouping of social network
businesses taking root in Newcastle. Such is the degree of specialisation
that several cities have taken on distinctive monikers, including Liverpool
(‘sensor city’), Sheffield (‘maker city’) and Leeds (‘data city’).
Figure 1 shows the over and underrepresentation of different digital
subsectors in the North, relative to to what would be expected given the
prevalence of these subsectors nationwide. These figures, from a company
called GrowthIntel that uses Big Data to generate predictive marketing
intelligence, are a rough approximation of the region’s current tech
specialities and are liable to change as markets shift and new technologies
come into play.
1. Tech City UK and Nesta (2016) Tech Nation 2016. London: UK. Figures derived from
Annual Business Survey.
2. Ibid. Figures derived from Annual Population Survey.
3. Ibid. Figures derived from Annual Population Survey.
The Digital Powerhouse
8
Figure 1: Digital subsector representation in the North relative to
the UK average
25%
connected devices/IoT
cybersecurity
data management and analytics
digital advertising and marketing
digital entertainment
e-commerce/marketplace
enterprise software and cloud computing
fintech
games
hardware/devices/open source hardware
online gambling
other
social networking
software and app development
telecommunications and networking
20%
15%
-15%
10%
-10%
5%
-5%
0%
Percent under/overrepresented
Source: RSA analysis of GrowthIntel data (2015) sourced as part of Tech Nation 2016.
The digital economy is a good economy
The emergence of the North’s digital economy has received considerable
attention – and for good reason. The sector UK-wide grew almost a
third faster (in turnover) than the rest of the economy between 2010 and
2014, highlighting its importance as a source of prosperity and wealth.4
The digital economy also plays a significant role in job creation, not-
withstanding the ongoing debate about the long-term impact of tech on
employment. Research by the Kauffman Foundation in the US shows that
the ICT sector is responsible for a large proportion of all new startups,
and that these startups are critical for net job growth.5 Most importantly,
we know that productivity – the gold standard economic indicator – is
4. Tech City UK and Nesta (2016) Op cit. Source: Annual Business Survey/Business
Structure Database (2014).
5. Hathaway, I. (2013) Tech Starts: High-Technology Business Formation and Job Creation
in the United States. Kauffman Foundation.
Box 1: What do we mean by tech businesses?
Tech businesses are those that solely provide a digital product or service, or
which heavily rely on one as a primary source of revenue.5 Tech business activity
encompasses the creation of information and communications technology
(including servers, hardware and software) as well as digital content (including
games, broadcast media and digital marketing). In this report, we are concerned
with ‘native’ tech activity (eg computer programming and gaming) as well as tech
activity in traditional industries (eg in health, gambling and finance). More detail
on our methodology can be found in the Appendix.
9
The Vision
higher among digital employees than the workforce of any other sector,
bar mining.6
It is not just the founders of tech businesses who benefit from this
wealth creation. According to Burning Glass Technologies, a data mining
company that analyses labour market information, the average advertised
salary of a digital employee in the UK is just under £50,000, 36 percent
higher than the advertised average for all sectors.7 The advertised salary
for a digital worker in Leeds is £47,959, while in Liverpool it is £42,153
(see Figure 2). Salary growth in the tech industry has also sped ahead of
wage rises in other sectors.8 Between 2012 and 2015, advertised digital
salaries grew by 29 percent in Leeds, 26 percent in Sunderland and 27
percent in Newcastle and Durham – indicating that they are among areas
with the strongest growth in digital salaries.9
Figure 2: Average advertised digital salaries and digital salary
premiums in Northern tech clusters
Source: RSA analysis of Burning Glass data (2015) sourced as part of Tech Nation 2016.
Looking at the challenging economic landscape of the North as a
whole brings the advantages of a thriving digital economy into even
sharper focus. If the region were classed as a country, it would be shown
to have grown more slowly than all but one EU state in the past 10 years,
with levels of productivity that have historically lagged behind the UK
average.10 The devolution of spending powers to cities like Manchester
and Leeds, coupled with major new investment programmes such as HS2,
are expected by the government to boost economic growth and make real
the aspirations for a Northern Powerhouse. But it is also important to
recognise the role being played by the digital economy, which is grounded
6. Hourly productivity (measured as total wage bill divided by total number of hours
worked) is £21.83 in the digital industries. The only sector (using one digit SIC codes) to have
greater productivity is mining and quarrying at £23.57. Source: Annual Population Survey (2015).
7. See Tech Nation 2016 for a full description of Burning Glass’s methodology.
8. Tech City UK and Nesta (2016) Op cit.
9. Ibid.
10. Cox, E. (2015) Rhetoric to Reality: A Business Agenda for the Northern Powerhouse. IPPR.
0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
Newcastle
& Durham
Average digital salary
Average digital salary as a % of typical salary
Sunderland
Liverpool
Manchester
Hull
Leeds
Sheffield
& Rotherham
115%
120%
125%
130%
135%
140%
145%
The Digital Powerhouse
10
in innovation and led by the private sector. As Table 1 shows, employment
and productivity are growing at a considerably faster rate in the North’s
digital sector than in the region’s non-digital industries.
Table 1: Changes in employment and productivity in the North’s
digital and non-digital sectors (2011/12–14/15)
Employment growth
Productivity growth
Digital sector
28.1%
11.3%
Non-digital sectors
3.1%
2.5%
Source: RSA analysis of the Annual Population Survey data
Note: Productivity refers to the total weekly wage bill divided by total hours worked per week.
Employment growth refers to jobs rather than hours worked.
The coming wave of digitisation
For these reasons alone, Northern aspirations for a bigger digital econo-
my are worthy of attention. However, tech businesses will become even
more relevant due to the coming wave of digitisation. Up until recently,
the digital economy was primarily concerned with the creation of ICT
hardware, server tools and computer software – making it a relatively
siloed industry. Yet the spread of digitisation – the process of collecting
and converting information into a digital format – means the digital
economy is beginning to underpin the activities of nearly every sector.11
Cisco, a leading voice on the subject, predicts that the UK market for
digitising healthcare, retail, transport and energy will be worth £100bn
by 2025.12
Digitisation is nothing new, but the pace of change is accelerating.
The media industry was one of the first sectors to be disrupted by digital
innovation, allowing new online players to muscle in on the markets for
film, music and news. More recently, the transport, hospitality and res-
taurant industries have been shaken up by the arrival of sharing economy
platforms, such as Uber, Airbnb and Deliveroo, which are now household
names. Cisco expects the same forces of digital disruption to transform
agriculture, manufacturing and financial services.13 But this is not just a
private sector phenomenon. Education, healthcare and civic governance
are all being shaped by digital innovation – often leading to better value
for money and improved outcomes for students, patients and citizens in
the round.
What is driving digitisation? One factor is technical capabilities.
Improvements in computer processing power, storage and bandwidth have
ramped up the possibilities for sophisticated data analysis. The world’s stock
of available data is also doubling in size every year, thanks to ubiquitous
internet connectivity (including access to smart phones) and the spread
11. Source of digitisation definition: http://whatis.techtarget.com/definition/digitization
12. Hinks, J. (2015) UK startups in line for £100bn Internet of Everything windfall [article]
Tech Radar, 18th March 2015.
13. Cisco (2015) The Internet of Everything: Unlocking the opportunity for UK startups.
11
The Vision
of internet-connected devices.14 One estimate suggests the number of
IP-enabled sensors worldwide will reach 50bn by 2020.15 The question is
whether the North’s emerging Digital Powerhouse can be alert to the pos-
sibilities of these developments and sit at the forefront of digitisation. The
answer of this report is a resounding yes, should the right conditions be met.
The prize of the Digital Powerhouse
The North has a solid foundation to build upon and an enthusiastic tech
community with the right ideas and determination. Sage UK, Boohoo and
Trident are home grown companies that exemplify what is possible. The
task now is to ensure experiences like theirs are not rarities but rather the
norm, and that the region’s nascent tech clusters move towards maturity.
A fully charged Digital Powerhouse would be one that matches the per-
formance of other leading tech hubs around the world – on startup rates,
productivity performance and innovation activity, among other measures.
This is no easy task but is a prize worth striving for:

• Raising employee productivity in line with the national average
for the tech industry would create an extra £5.7bn in GVA.16

•
Increasing the rate of self-employment in the digital economy
in line with the rest of the UK would result in over 9,700 more
tech founders.17
These ambitions will only be met once several ‘creative conditions’ are
in place – four of which are already under the spotlight:
Talent – Successful tech clusters depend on a pool of highly skilled work-
ers – not only coders and programmers but also people with sales and
marketing expertise. The UK’s digital economy is expected to require an
extra 760,000 digital workers between 2015 and 2020.18 The government’s
long-term response has been to introduce compulsory coding within
schools, while at a local level several upskilling initiatives have been
launched. Examples include Northcoders, which runs coding boot camps
for entry-level software developers, and Career Hacker, a new platform
using Big Data to help students, teachers and careers advisers keep up
with the North’s industry trends.19 The region is fortunate to already have
a number of well-respected computer science university departments that
can be drawn upon for talent.
14. Evans, P. and Forth, P. (2016) Navigating a world of digital disruption. Boston
Consulting Group Perspectives.
15. Ibid.
16. Average GVA per tech worker in the North is £34,919, compared with £55,073 for the
UK as a whole – a gap of £20,154. The £5.7bn figure was arrived at by multiplying £20,154 by
the number of tech workers in the North – 283,515. Sources: Annual Population Survey data
(2014) and the Annual Business Survey data/Business Structure Database (2014), both cited in
Tech City UK and Nesta (2016) Op cit.
17. The current rate of tech self-employment in the North is 0.41%, compared with 0.55%
for the rest of the UK. Closing the gap would mean increasing the North’s rate of tech self-
employment by 0.14% in a workforce of 6.93 million. This equates to 9,700 extra tech founders.
Source: Annual Population Survey data.
18. Development Economics and O2 (2015) 2.3 million digital workers required by 2020 to
power the UK’s digital economy [press notice].
19. For more information see https://northcoders.com/ and https://careerhacker.uk/
The Digital Powerhouse
12
Infrastructure – Access to superfast broadband, affordable workspace and
a modern transport system are basic ingredients for a thriving tech startup
ecosystem. Although Northern cities have been waylaid by a history of
underinvestment, the state of the region’s infrastructure has improved in
recent years, and several major projects are in the pipeline. The HS2 in-
vestment, electrification of the Midland Mainline railway and the creation
of the Transport for the North partnership are all promising develop-
ments. So too are the recent announcements by the chancellor to build an
HS3 line and widen the M62 road link between Leeds and Manchester.
Meanwhile, several cities have ambitions to introduce ‘ultrafast’ broad-
band (at 1GB speeds), opening up new avenues for digital innovation.
By 2017, 150,000 premises in Hull and East Yorkshire will have access to
Fibre-to-the-Premises (FTTP) broadband.
Finance – Banks, grant-making bodies, angel investors and venture
capitalists (VCs) are all essential players whose capital injections keep tech
clusters in motion. Although the biggest VCs and wealthiest angels are
based in London, the North is home to a modest but expanding invest-
ment community. The tech investment firm GP Bullhound established its
Manchester office in 2014, while Newcastle-based Northstar Ventures
now has over £95m under management. Added to these are accelerators
like Dotforge operating in Sheffield, Leeds and Manchester, and Ignite in
Newcastle and Manchester, both of which offer equity-based funding to
startups. Tech North is also leading the creation of a co-investment fund
that aims to catalyse private investment in the North, allowing easier
access to finance for the tech community.
Culture – Studies show that clusters perform best when there is a tight-knit
community of businesses and a culture of openness and collaboration.20
Northern cities fare strongly in this regard. Sheffield Digital, Silicon
Drinkabout in Leeds and Creative Kitchen in Liverpool are among the
many networking groups that bring people together to encourage col-
laboration and support, and in many cases promote the local tech scene.
The North also boasts several vibrant incubators and co-working spaces,
such as Baltic Creative in Liverpool, as well as major tech festivals like
FutureEverything and Thinking Digital. This is not to mention the wider
cultural and heritage assets that draw talent to the region, from the
nightlife of Newcastle to the great outdoors of the Peak District.
The missing condition
Finance, infrastructure, talent and culture are the bedrocks of a
digital economy, and they are rightly taking centre stage in efforts to
build the North’s Digital Powerhouse. However, this report argues
that we also need to pay attention to a fifth creative condition: market
opportunities. By this we mean the ability of tech businesses to find clients
and develop digital products and services that meet their needs. As impor-
tant as the aforementioned factors are, ultimately the survival and growth
of digital businesses in the North rests on them winning contracts and
20. See for example Nathan, M., Vandore, E. and Whitehead, R. (2012) A Tale of Tech
City: The Future of Inner East London’s Digital Economy. Centre for London.
13
The Vision
having paying customers. Focusing on market opportunities would signal
a step-up in the nature of business support from initiatives that boost
the supply (of tech businesses) to those that stimulate demand (for their
products and services).
Evidence indicates tech businesses would benefit from such a focus.
A recent survey undertaken as part of Tech City UK and Nesta’s Tech
Nation 2016 study found that many UK tech firms believe they are being
held back by a weak economic climate.21 The figures are particularly high
for several Northern cities, with 25 percent of tech businesses in Hull and
36 percent of those in Sheffield and Rotherham citing a poor economic
climate as a concern. The sentiment is echoed in the findings of the UK’s
Small Business Survey. Its latest results show that 37 percent of businesses
in the ICT industry – another way of framing the digital economy – be-
lieve they are weak at entering into new markets, and 24 percent say they
have difficulty introducing new products and services.22 The problem is
particularly acute for tech companies in the North as they appear more
dependent on revenue from customer sales to finance growth, rather than
investment finance.
In this report we look at how tech businesses across the North can
connect more effectively with the wealth of market opportunities on
their doorstep. The region has almost one million businesses and is
home to several large corporates – including Sky, Asda, BAE Systems,
The Co-operative Group and First Direct – a number of whom could be
considered potential clients.23 As many opportunities exist in the public
sector, with health services, education providers, housing associations
and other bodies all tendering for products and services that the region’s
tech firms could provide. Alongside these more direct business opportuni-
ties, the report considers how tech businesses can make better use of the
knowledge held by universities, science parks and other businesses,
so as to help them innovate and develop the next generation of digital
products and services.
Our ultimate argument is that the North’s aspirations for a Digital
Powerhouse can be best met by focusing on demand, and by encouraging
tech businesses to orient themselves to mainstream market opportunities.
Next generation clusters
While the purpose of this report is first and foremost to identify ways
of supporting the North’s digital economy, the wider population has
as much to gain from collaborative innovation, where multiple parties
generate new products and services for mutual advantage. Local public
services have the opportunity to be at the forefront of digitisation – from
delivering new educational learning tools in the classroom, to introducing
telecare systems across GP surgeries. In the same way, putting digital tools
at the disposal of local businesses promises to raise productivity and give
21. Tech City UK and Nesta (2016) Op cit.
22. Department for Business, Innovation and Skills (2016) Small Business Survey 2014: All
business data. BIS. The figures refer to all respondents who said they are ‘very poor’ or ‘poor’ at
the activity in question.
23. Department for Business, Innovation and Skills (2015) Business Population Estimates
2015. BIS. The Business Population Estimates show that together the three Northern subregions
have 1,050,105 private sector businesses.
The Digital Powerhouse
14
firms a competitive edge over their rivals. Not just in retail and media,
but in advanced manufacturing, life sciences, logistics and energy produc-
tion – all sectors where the North punches above its weight. In this way,
the region can become a test-bed for innovation.
Collaboration does not have to stop there. Should partnerships yield
results, the next logical step would be to take locally-born and locally-
tested innovations onto the world stage. A local manufacturer could
showcase the machine sensor technology of a home-grown IoT startup it
has worked with, while NHS commissioners could champion among their
peers the pioneering technology they have purchased from a Northern
HealthTech company. Around the world, hundreds of conferences, trade
shows and high-level meetings are drawing together influential leaders in
the public and private sectors – and these present the ideal opportunity
to spread the word about Northern tech innovations. Local clients of
tech businesses should fly the flag for them internationally, recognising
that it will be in their benefit if the North is seen as a global centre of
tech excellence.
Collaborative innovation of this kind marks a departure from the usual
way of ‘doing tech’. The archetypal cluster is one where tech businesses
operate in siloes, untethered from the cities in which they operate. Silicon
Valley – which sets the bar for all clusters – is often seen as at the extreme
end of this disconnect. Measured against the number of IPOs and multi-
million dollar businesses, the Californian hub is unbeatable, and the city’s
highly skilled workers have certainly benefited in the form of plentiful
jobs and high wages. Yet for the everyday citizen of San Francisco, and for
the businesses and public services that operate in its shadow, the benefits
are less obvious. Not every cluster is so detached from its surroundings,
but there is a general tendency to consider only the amount of wealth
generated by digital economies rather than how that wealth is created
and distributed.
The starting point for this report is to claim that the North’s Digital
Powerhouse can forge a different path – one where tech businesses are
tightly woven into the fabric of their cities, where public services and sur-
rounding businesses are ready and willing to co-innovate, and where all
citizens have an incentive to throw their weight behind creating a prosper-
ous digital economy. We hope our report provokes a conversation about
how this vision can be realised, and that it articulates the potential prizes
that are at stake. We begin by exploring opportunities for collaboration
in the private sector, before moving onto public sector partnerships and
finally the potential for wider knowledge exchange.
Box 2: How to read this report
This report should be read as a prospectus of opportunities for new partner-
ships. Each of the three main chapters focuses on one aspect of collaboration
and considers the following questions:
• What are the opportunities for tech businesses? (eg a fast-growing retail
industry, desire for efficiency savings in the NHS, or potential
partnership with a university).
• What are the credentials of local tech businesses? (eg strong
e-commerce talent in Manchester, or HealthTech expertise in Leeds)
• What are the barriers to collaboration? (eg strict procurement
procedures, or risk-averse corporate buyers).
• How can these barriers be broken down? (eg via matchmaking
services or innovation vouchers).
The report is clearly segmented so that readers can go directly to the
information most relevant to them. Health technology officers will be most
interested in the section on public sector collaboration, corporate execu-
tives might gain more from the section on private sector partnerships, and
university outreach staff are likely to benefit most from the last chapter on
knowledge exchange.
The report draws upon and complements the findings of the Tech Nation
2016 report, compiled by Tech City UK and Nesta. Whenever data is cited in
the report, we explain in the footnotes where this information originates.
15
The Vision
firms a competitive edge over their rivals. Not just in retail and media,
but in advanced manufacturing, life sciences, logistics and energy produc-
tion – all sectors where the North punches above its weight. In this way,
the region can become a test-bed for innovation.
Collaboration does not have to stop there. Should partnerships yield
results, the next logical step would be to take locally-born and locally-
tested innovations onto the world stage. A local manufacturer could
showcase the machine sensor technology of a home-grown IoT startup it
has worked with, while NHS commissioners could champion among their
peers the pioneering technology they have purchased from a Northern
HealthTech company. Around the world, hundreds of conferences, trade
shows and high-level meetings are drawing together influential leaders in
the public and private sectors – and these present the ideal opportunity
to spread the word about Northern tech innovations. Local clients of
tech businesses should fly the flag for them internationally, recognising
that it will be in their benefit if the North is seen as a global centre of
tech excellence.
Collaborative innovation of this kind marks a departure from the usual
way of ‘doing tech’. The archetypal cluster is one where tech businesses
operate in siloes, untethered from the cities in which they operate. Silicon
Valley – which sets the bar for all clusters – is often seen as at the extreme
end of this disconnect. Measured against the number of IPOs and multi-
million dollar businesses, the Californian hub is unbeatable, and the city’s
highly skilled workers have certainly benefited in the form of plentiful
jobs and high wages. Yet for the everyday citizen of San Francisco, and for
the businesses and public services that operate in its shadow, the benefits
are less obvious. Not every cluster is so detached from its surroundings,
but there is a general tendency to consider only the amount of wealth
generated by digital economies rather than how that wealth is created
and distributed.
The starting point for this report is to claim that the North’s Digital
Powerhouse can forge a different path – one where tech businesses are
tightly woven into the fabric of their cities, where public services and sur-
rounding businesses are ready and willing to co-innovate, and where all
citizens have an incentive to throw their weight behind creating a prosper-
ous digital economy. We hope our report provokes a conversation about
how this vision can be realised, and that it articulates the potential prizes
that are at stake. We begin by exploring opportunities for collaboration
in the private sector, before moving onto public sector partnerships and
finally the potential for wider knowledge exchange.
Box 2: How to read this report
This report should be read as a prospectus of opportunities for new partner-
ships. Each of the three main chapters focuses on one aspect of collaboration
and considers the following questions:
• What are the opportunities for tech businesses? (eg a fast-growing retail
industry, desire for efficiency savings in the NHS, or potential
partnership with a university).
• What are the credentials of local tech businesses? (eg strong
e-commerce talent in Manchester, or HealthTech expertise in Leeds)
• What are the barriers to collaboration? (eg strict procurement
procedures, or risk-averse corporate buyers).
• How can these barriers be broken down? (eg via matchmaking
services or innovation vouchers).
The report is clearly segmented so that readers can go directly to the
information most relevant to them. Health technology officers will be most
interested in the section on public sector collaboration, corporate execu-
tives might gain more from the section on private sector partnerships, and
university outreach staff are likely to benefit most from the last chapter on
knowledge exchange.
The report draws upon and complements the findings of the Tech Nation
2016 report, compiled by Tech City UK and Nesta. Whenever data is cited in
the report, we explain in the footnotes where this information originates.
Box 3: Why seven cities?
For the sake of brevity and clarity, our data analysis focuses on seven locations
with the greatest tech activity: Liverpool, Manchester (including Salford and
Trafford), Sheffield (including Rotherham), Leeds, Hull and Newcastle (includ-
ing Durham). We recognise that the North’s digital economy is not limited to
these clusters, and wherever possible have sought to highlight tech companies
arising elsewhere – from drone manufacturers in Wigan and telecare providers
in Airedale, through to makers of EdTech tools in Barnsley and developers of
loan management software in Harrogate.
The Digital Powerhouse
16
Digital GVA
Annual Business Survey/BSD (2014)
Digital economy jobs
Annual Population Survey (2014)
Advertised digital salary
Burning Glass analysis (2015)
Digital employment growth
Annual Population Survey (2014)
Advertised salary growth
Burning Glass analysis (2015)
City data sourced from Tech City UK and Nesta’s
Tech Nation 2016 report
* Leeds prominent sectors information provided
by Leeds Data City
Liv
Shf
Rth
New
Dur
Sun
Man
Lds
Hul
19,535
£42,153
14,313
£42,058
3,675
£38,999
22,237
£44,068
23,734
£47,959
6,070
£37,258
51,901
£45,204
£269m
£273m
£107m
£764m
£671m
£189m
£1.7bn
+7%
+16%
+3% +18%
+17% +26%
+5% +27%
+7%
+29%
+2% +14%
+13% +18%
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital economy jobs
Advertised digital salary
Digital GVA
Digital GVA
Digital GVA
Digital GVA
Digital GVA
Digital GVA
Digital GVA
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Digital employment growth
(2011–14)
Advertised salary growth
(2012–15)
Prominent sectors
IoT and connected devices
App and software development
E-commerce and marketplace
Gaming
Prominent sectors
E-commerce and marketplace
Hardware, devices and open source hardware
App and software development
Enterprise software and cloud computing
Prominent sectors
Telecommunications and networking
Gaming
Hardware, devices and open source hardware
App and software development
Prominent sectors
Social networks
Data management and analytics
E-commerce and marketplace
Gaming
Prominent sectors*
E-commerce and marketplace
App and software development
Digital advertising and marketing
Digital media and entertainment
Prominent sectors
E-commerce and marketplace
App and software development
Hardware, devices and open source hardware
Data management and analytics
Prominent sectors
EdTech
Digital advertising and marketing
FinTech
E-commerce and marketplace
Liverpool
Tech Cluster
Fact Sheet
Data sourced from Tech Nation 2016
Sheffield and
Rotherham
Sunderland
Newcastle
and Durham
Sources
Leeds
Hull
Manchester
(includes Salford and Trafford)
Analysis by
17
Private Sector Collaboration
Private Sector
Collaboration
With the flurry of media commentary surrounding social network-
ing sites like Facebook and sharing economy platforms like Uber, we
could be forgiven for believing the digital economy is primarily about
consumer-facing businesses. Yet the column inches these companies take
up belies the fact there is equally significant innovation happening up
stream in business-to-business supply chains. From AgriTech that controls
the distribution of fertiliser on farms, through to sensors that monitor
machinery in factories, the potential for digital innovation to augment
production in all corners of the private sector is considerable.
Attuned to the possibilities, many corporates have begun to partner
with tech businesses and buy in their expertise. In some cases, this means
purchasing off-the-shelf digital products (eg CRM software), while in
others it means commissioning tailor-made tech solutions. At the more
intense end of the collaborative spectrum, companies with capital are
investing in fledgling tech startups or acquiring firms and their talent
outright. Why would corporates go to this trouble rather than innovate
in-house? According to the US academic Clayton Christen, large incum-
bent businesses often struggle to generate ground-breaking innovations
on their own because they are focused on meeting the needs of existing
customers through incremental change.24
The scope for tech businesses to collaborate with private sector firms
is as great in the North as anywhere else. The region boasts close to a
million businesses, including 600 large companies employing more than
500 people.25 Among the major corporates with a presence in the region
are Sopra Steria, Barclays, Sky, Siemens, BAE Systems, Asda and The Co-
operative Group. Barclays is reported to spend £3bn on technology across
their operations, while the Co-operative Group spends £400m – some of
which may already flow to Northern companies.26 However, the opportu-
nities for collaboration are far from exhausted. The UK as a whole ranks
15th out of 29 European countries on a measure of digital integration
among businesses, indicating substantial room for improvement. 27
24. Christensen, C. (1997) Innovator’s Dilemma: When new technologies cause great firms
to fail. Harvard University Press.
25. Department for Business, Innovation and Skills (2015) Business Population Estimates
2015. BIS.
26. For more information see www.cio.co.uk/cio100/2014/barclays and www.cio.co.uk/
cio100/2014/cooperative-group/
27. Based on data collected as part of the European Digital Economy & Society Index
(DESI). For more information, visit https://ec.europa.eu/digital-single-market/en/desi
The Digital Powerhouse
18
This chapter argues that it is within the North’s gift to become a world
leader in private sector-led collaborative innovation. In doing so, we home
in on a handful of sectors in the region and discuss how they might benefit
from working more closely with surrounding tech clusters. These indus-
tries were chosen according to several factors, including their total output,
growth rate, and perceived readiness for digitisation. Table 2 below lists
the top 20 sectors in the North by overall turnover, clearly showing that
retail, manufacturing and logistics are three large markets that deserve
closer attention from the tech community. The North’s media industry is
not as large in terms of total output, but is significant relative to the size
of the sector in other UK regions.
Table 2: Top 20 sectors in the North by overall turnover
Industry
Turnover (£m)
Wholesale trade, except of motor vehicles
95,549
Retail trade, except of motor vehicles and motorcycles
73,145
Wholesale and retail trade and repair
27,372
Manufacture of food products
21,540
Manufacture of C3:D23 vehicles, trailers and semi-trailers
17,482
Specialised construction activities
16,086
Gambling and betting activities
14,916
Manufacture of coke and refined petroleum
14,673
Manufacture of chemicals and chemical products
14,430
Construction of buildings
13,802
Telecommunications
12,850
Warehousing and support activities for transportation
12,813
Food and beverage service activities
10,812
Activities of head offices; management consultancy activities
10,646
Land transport and transport via pipelines
10,076
Office administrative, office support and other business support
9,221
Architectural and engineering activities
9,174
Manufacture of fabricated metal products, except machinery
9,104
Computer programming, consultancy and related activities
8,555
Legal and accounting services
8,174
Source: RSA analysis of Annual Business Survey data (2013)
Retail and gambling
When it comes to sheer size, few sectors measure up against retail. It is
the biggest industry in the North and continues to grow – by 7 percent
Retail and gambling
Manufacturing
Logistics
19
Private Sector Collaboration
in turnover between 2008/09 and 2012/13.28 Retail trade is worth £73bn
in turnover to the region’s economy, while wholesale retail contributes
£95.5bn.29 According to Cisco’s analysis, retail is also an industry ripe for
digitisation (see Table 3). E-commerce tools, customer relationship man-
agement (CRM) software and digital marketing services are nothing new
in the world of retail, but they are becoming more sophisticated thanks to
Big Data and improved analytical tools. New technologies including anti-
theft gadgets, inventory management tools and beacon tech – devices that
push signals and information to customers in store – promise to further
boost the capabilities of retailers.
Just as the North has a sizeable retail sector, so too does it have
the talent to positively disrupt it. Nationally significant clusters in
e-commerce exist in Newcastle, Manchester and Sheffield, while large
digital advertising and marketing clusters have taken root in Manchester
and Leeds. Rotherham-based Linktagger specialises in beacon and NFC
(Near Field Communications) hardware, which, among other uses,
enables retailers to send special offers to people as they shop. In Salford,
a business called Formisimo has developed analytics software to help
online retailers uncover pain points in their web forms and improve sales
conversion rates. Meanwhile in Manchester, a company called Gnatta has
created award-winning ‘omni-channel’ CRM software to seamlessly align
all communication activities between vendors and their customers.
The gambling sector is another strong suit for Northern cities. It ranks in
the top 20 industries by turnover in all three Northern regions, and its con-
siderable growth rate shows little sign of petering out.30 Overall the sector
is worth £14.9bn in turnover to the North, and is nearly twice the size of
the legal and accountancy trade.31 BetFred is headquartered in Warrington,
Sky Bet in Leeds, Tombola in Sunderland and Bet365 in Stoke. As with the
wider retail industry, there is clear potential for betting companies like these
to make use of the digital expertise in nearby tech clusters. The application
of digital tools, however, will pose further ethical dilemmas for an industry
already faced with accusations of being indifferent to problem gambling.
How advocates of BetTech approach this challenge will be a litmus test for
the community-conscious vision of a Digital Powerhouse.
Manufacturing
International competition has made it increasingly difficult to maintain
a strong industrial base, as shown recently in the problems facing the
Tata steel mills. Yet while the steel industry may be under pressure, the
UK is still home to world class manufacturers in automotives, pharma-
ceuticals and life sciences. Manufacturing remains particularly important
to the North, contributing £150.5bn in turnover to the economy and
employing 805,500 people.32 Regional specialisms span food production
(eg Cranswick in Hull), textiles (eg James Dewhurst in Manchester),
28. RSA analysis of Annual Business Survey data (2013).
29. Ibid. Excluding the sale of motor vehicles.
30. According to RSA analysis of Annual Business Survey data (2013), the turnover of
gambling and betting activities in the North grew by 7.1% between 2008/09 and 2012/13.
31. The turnover of the North’s legal and accountancy sector was £8.2bn in 2013 (Annual
Business Survey).
32. RSA analysis of Annual Business Survey data (2013).
“The North of
England was the global
powerhouse of the
industrial revolution,
and the legacy of this is
the largest pan regional
cluster of knowledge
intensive supply chain
activity in the UK…
As we embrace the era
of ‘software eating
industry’, through the
process of digitising
our supply chains, we
can play a major role
in shaping and driving
the adoption of the
innovations which will
define the 21st century.”
Lee Strafford
The Digital Powerhouse
20
chemicals (eg Kerling in Runcorn), and automotives (eg Nissan in
Sunderland). The North has also nurtured a number of advanced
manufacturing clusters, including groupings of aerospace businesses in
Lancashire, robotics companies in Yorkshire and developers of graphene-
based solutions in Manchester.
What does manufacturing look like in the digital age? The implications
of digitisation for heavy industry are as profound as they are for services.
New machine learning software can help engineers predict when their
tools are likely to need replacing, while sensors on the factory floor can
highlight faults or idle activity in process lines. Machine transmitters and
computer interfaces have been around for more than a decade, but their
price has fallen to such a point that most factory equipment can now be
affordably monitored. Digitisation has also led to the development of
new machine types, including additive tools that build products up layer
by layer using 3D modelling software. Such is the excitement around the
so-called ‘Industrial Internet’ that Siemens has launched a corporate
venturing fund specifically tasked with backing startups that disrupt
traditional models of manufacturing.
The factory floors of James Dewhurst in Manchester or Prince’s
Foods in Liverpool may seem a world away from the polished offices of
the surrounding tech community, but there is ample opportunity for col
laboration. 2M Automation is a Manchester-based company that creates
automation solutions for factories, and recently worked with Nissan in
Sunderland to design a fluid conveying system for a new machine. The
region is also home to a vibrant community of IoT enthusiasts, some of
which, like Pimoroni in Sheffield, are creating monitoring devices and
sensors that can be applied in a factory setting. Nearly every Northern
city also has a makerspace, housing tinkerers and entrepreneurs that are
modifying digital fabrication tools and product modelling software that
could be prominent in the foundries of the future. There is even scope for
the region’s cyber security firms to help local manufacturers protect their
growing suite of digital enabled machinery.33
Table 3: Industries ranked by their potential for further digital
disruption – according to Cisco
Technology products and services
1
Media and entertainment
2
Retail
3
Financial services
4
Telecommunications
5
Education
6
Hospitality and travel
7
Manufacturing
8
Healthcare
9
Utilities
10
Oil and gas
11
Pharmaceuticals
12
33. The North West Cyber Security Cluster was founded in 2014 to foster links between
Northern cyber security firms and surrounding businesses.
21
Private Sector Collaboration
Cisco’s ranking of industries according to their digitisation potential is based on third
party data and a survey undertaken with industry leaders around the world. More details
on the methodology can be found in Cisco (2015) Digital Vortex: How digital disruption is
redefining business.
Logistics
Logistics is what might be called a ‘silent sector’ – indispensable to the
functioning of a healthy economy but mostly hidden from view. Included
under this banner are road, air and rail haulage firms, port authorities,
warehousing businesses and public transport providers. The North has
a relatively large logistics base, being home to major businesses such as
Eddie Stobart (Carlisle), the Bibby Line Group (Liverpool) and Harrison
Solway (Hull). Sheffield boasts one of the biggest warehouse locations
in the country – Logistics Hub UK – with Asda, BMW and Amazon all
running distribution centres on site. The region also has eight major ports
and four major airports.34 Altogether, logistics accounts for £30.5bn of
private sector turnover in the North, a figure that grew by 11 percent
between 2008/09 and 2012/13.35
Logistics is not an industry that appears on the verge of a digital
revolution, yet recent developments in tech have opened up new avenues
for innovation. New digital tools and products are being used to improve
inventory management, boost fuel efficiency, enhance insurance estimations
and streamline route optimisation. Internet connected devices, for example,
allow logistics firms to track the precise location of their goods, while
sophisticated GPS systems crunching real time traffic data can help delivery
drivers map out the fastest route to their destination. Added to these modest
innovations is an emerging field of AutoTech that is transforming vehicles
under the bonnet, connecting hundreds of car parts to computers in a bid to
improve efficiency and passenger safety. Unilever, which has recognised the
potential for digital innovation in transport, wants to reduce emissions from
its global logistics network by 40 percent from 2010–2020.36
Can the North’s tech clusters bring similar innovations to the region’s
logistics firms? A pioneering business in Sheffield gives cause for opti-
mism. The Floow uses cutting edge telematics technology to improve
vehicle insurance services. In practice this means asking the driver to
download an app to their smartphone or to install a ‘black box’ into
their vehicle to monitor driver behaviour. The Floow supply their services
to a number of leading insurers worldwide, and recently secured a deal
to receive and process data directly from OEM equipment mounted on
Renault and Nissan vehicles. Another company called Nomad Digital
in Newcastle provides tech solutions for rail companies, including WiFi
systems, devices that monitor train equipment and passenger information
displays. Overall, the digital credentials that make Northern tech clusters
well suited to transform manufacturing are the same that put them in a
good position to improve logistics: specialisms in IoT, expertise in hard-
ware, and talent in software and cloud computing.
34. Major airports are those with more than a million passengers a year. See Civil Aviation
Authority (CAA) statistics.
35. RSA analysis of Annual Business Survey data (2013). ‘Logistics’ refers to ABS data on
‘transport and storage’.
36. Scottish Enterprise (2014) Opportunities in sustainable logistics.
“Liverpool has a
massive port and
logistics cluster, as
well as a booming
retail sector. I can
guarantee that if
large players in either
of these industries
took the leap and
decided to work with
one of our dynamic
tech companies, they
would be seriously
impressed by their
innovation potential.”
Kevin McManus,
Liverpool Invest
The Digital Powerhouse
22
Media
Media has made a mark on the local econom