Turning the tide on regional tech innovation

9 min read | Robin Beattie | Article | Leadership | Information technology sector

Tech start-up founder accesses IT

The UK is a key actor in the tech start-up world stage, being the number one ecosystem in Europe, and third globally for VC investment.

London has long held the mantle as the UK’s premier tech hub, but regional start-up growth is on the rise. The UK has experienced a record-breaking surge in tech start-ups, with the number of new entries rising 22% last year – totalling 51,017 – according to audit, tax and consulting firm, RSM UK.  

However, the total number of start-ups represent just one part of the equation, and we’re still far off from seeing a level playing field for entrepreneurship. London is home to 80 of the top 100 fastest growing start-ups across the UK and Ireland, according to Sifted’s latest data, followed by Cambridge with a total of four.

To create a united tech network that can compete on global scale, it’s crucial that tech start-ups across the UK are given the platform, and talent, they need to thrive.


London still commands the lion’s share

London has long led the charge as an established tech hub, with the capital being fertile ground for ambitious tech start-ups, producing more unicorns (tech enterprises with a value exceeding $1bn) than anywhere else in Europe. Combined with a favourable regulatory environment, top education institutions, and the city’s capacity to tap into high growth sectors – fintech being a particular strongpoint – London continues to attract venture capital at a significant rate.

Unsurprisingly then, London captures the majority of total VC investment – 65% of the UK’s total in 2023. However, recent years has seen a noticeable rise in regional VC investment, and innovation outside the capital has surmounted expectations.


Start-ups rise outside the capital

The number of tech start-ups in the East of England has grown by almost a third (30%), while a host of cities outside London have attracted notable funding rounds in recent years. Whether it’s Birmingham-based Conigital, the highest-funded driverless car start-up in Europe, or Bristol-borne energy and climate tech start-up OVO Energy, which raised the largest climate tech funding round outside of London last year, there’s a vibrant regional tech ecosystem.

Moreover, British regions have bucked the trend of a global investment drop in tech and science start-ups, with Wales and Yorkshire experiencing a 20% uplift in venture capital investment last year, defying the wider drop in equity investment.

This upward trend certainly seems to back Business Secretary Grant Schapps’ vision for ‘Scale-Up Britain’, citing the need to turn start-ups into world-beating scale-ups. Promising news – but there are two sides to the UK’s start-up growth.

For the UK to truly establish its wider regions as destinations for tech growth, industry leaders and policymakers must first grapple with some persistent obstacles.


Finding a funding solution

Despite the UK being a leading destination for venture capital investment, a risk-averse market may limit funding opportunities. And while financial considerations are hardly a new challenge for ambitious tech entrepreneurs, the current economic climate hasn’t made the task any easier. Tech sector leaders have cited energy costs (36%), the current level of tax on business (33%) and interest rates (31%) as the top barriers when doing business in the UK.


“A greater distribution of investment – including in infrastructural development, such as data centres equipped to support AI – will be needed to grant emerging tech hubs the resources they need to close in on the capital."


What government support can tech start-ups expect? Some relief may take the shape of a series of reforms following the 2024 Spring Budget, including the pledge to build on the Mansion House reforms to unlock more pension capital. Additionally, the government plans to release a new £7.4m upskilling fund pilot to help SMEs develop emerging AI skills and unlock new opportunities. However, a greater distribution of investment – including in infrastructural development, such as data centres equipped to support AI – will be needed to grant emerging tech hubs the resources they need to close in on the capital.

The North could be raising the banner, with a group of tech companies in the region calling for a Manchester-based digital investment fund that challenges the “dominance of London and the South East.” The fund, if successful, would build on the region’s strong student presence and burgeoning tech ecosystem.

While undeniably important, funding represents just one consideration when bolstering national start-up growth. To foster more equitable tech futures and help spur social mobility, it’s critical that tech talent can be developed and harnessed from every corner of the UK.


Skills shortages stifle innovation

With technology advancing at break-neck pace, the tech skills gap remains a persistent challenge for organisations of all sizes to overcome. But for start-ups and SMEs looking to kickstart their business – particularly those outside the ‘golden triangle’ – this obstacle may be even more pressing.

Our latest salary guide data revealed that 95% of tech employers have experienced skills shortages in the last year, with niche talent markets being particularly hard to unlock. Moreover, a quarter (25%) of employers say they have access to only some of the skills needed to best leverage AI tools and technologies – a clear driving force for tech start-up innovation.

What’s more, the high demand for candidates possessing new skills has only driven salary expectations – often beyond the restricted budgets of tech start-ups, who will have to be more creative than most when building sustainable talent pipelines. This might include engaging early careers talent, leveraging the government’s recently implemented apprenticeship funding for SMEs.


Channelling the right culture

Chancellor Jeremy Hunt has suggested that the UK was on track to become "the world’s next Silicon Valley" – but this isn’t a comparison every tech founder will welcome. Aside from being a slightly misleading label – with the UK being far behind the US in terms of investment – the exclusive, male-orientated culture sometimes attributed to the Valley might not be a constructive or desirable model.


“Instead of trying to emulate the Valley, tech founders might prefer to double down on the unique traits and talents of their respective regions..."


Moreover, the flashy office workspaces and novelty perks defined by certain tech giants may be a distraction from the wider picture. As Sofia Nunes, cofounder of Mambu phrases it, the “biggest misconception about culture is that it comes down to workplace perks and benefits. While this is not something to neglect, it’s only one piece of the puzzle.” 

Instead of trying to emulate the Valley, tech founders might prefer to double down on the unique traits and talents of their respective regions, whether that be world-class educational institutions, diverse demographics, or progressive workplace attitudes. Doing so won’t only drive authenticity – something that any tech start-up should value – but help to rectify imbalances seen across the industry at large.


Fertile ground for scale-up growth

From London to Leeds, the UK is proving its resilience and dependability as a platform for tech growth. However, rather than simply aspiring to create ‘the next Silicon Valley’, there’s an opportunity to defy industry assumptions, creating a diverse and accessible tech landscape that builds on local talent.

Britain is blessed with varied tech regions – drawing from the unique identity, talents and creativity of these locations lies the key to a more equitable and sustainable rise in tech innovation.


How Hays can help secure your growth in tech

With 85 offices across the UK and Ireland, we’re poised to combine our national reach with local knowledge, tapping into the best talent pools and partnerships to provide your enterprise the tech talent it needs to reach the next level.

And wherever you are in your tech journey, you can trust that our expansive talent networks, latest market intelligence, and industry expertise will support your continued growth – no matter your location.

Get in touch with me or one of our expert consultants today to discuss how we can scale-up your tech ambitions with future-ready talent strategies.


About this author

Robin Beattie, Director, National Technology, Hays

Robin has over 24 years’ experience in the staffing industry, leading Hays’ evolving strategy to overcome talent and skills challenges for scale-up businesses, whilst elevating growth across regional tech hubs. His previous experience as managing director of an international talent organisation focused on the start-up/scale-up tech sector – and background as an active angel investor – has given him a strong understanding of the challenges that founders and their teams face on their growth journeys.

articleId- 68899542, groupId- 20151