Can a northern tech cluster take off?

  • 23 October 2014
  • From the section Technology
  • comments
Angel of the North

The North of England is about to get a new technology cluster to emulate the success of London's Tech City.

That at least is the claim this morning from the deputy prime minister. Nick Clegg has unveiled plans for something called TechNorth, described as a new technology hub for the region.

This initiative will be focused not on one city but five - Manchester, Sheffield, Leeds, Newcastle and Liverpool. The aim will be, in the words of the press release, "to do what TechCity has done for East London - put TechNorth on the international map". All of which begs two questions - can you create a tech cluster spread over a wide area rather than one place, and has Tech City really been the success claimed by government?

There is no doubt that all of the five cities making up this proposed cluster - or "virtual hub" as a spokeswoman described it to me - have some great technology businesses. Sheffield, Liverpool and Leeds have plenty of games and digital media firms, Newcastle is strong in software, with a FTSE 100 firm Sage based there, and Manchester has the wonder material graphene and other great technology emerging from its universities.

Now a new agency will be charged with attracting inward investors to the North, and existing local tech businesses will be encouraged to pool ideas and resources. But TechNorth may be a difficult brand to sell to overseas giants looking to invest in the UK. Will a Google or a Huawei be offered a menu of five cities to choose from - or steered towards one?

And while you can see how firms in Leeds and Sheffield might collaborate, Liverpool and Newcastle are more than 160 miles and three hours apart by either car or train. Firms there may find it easier to get to London, which illustrates why better transport links across the North will need to be at the heart of this new strategy.

Image caption Will TechNorth be hampered by the distances between the cities involved?

Still, you can see exactly why the government needs to start banging the drum for tech in the North. There has been much grumbling from firms outside London - in places like Cambridge as well as Manchester - about the money and political muscle that has been put behind Tech City. After all, argued the critics, London's economy was already accelerating away from the rest of the UK, so why did it need to be turbocharged with more cash?

The answer was that four years ago when David Cameron announced his plan to make East London a rival for Silicon Valley, there was much concern about the Olympics legacy. There was pressure to prove that the games would help regenerate poorer areas of the capital long after the athletes had departed.

The government is now trumpeting the success of the initiative, pointing to several reports, one showing that there are now more than 3,000 digital firms in Tech City employing 48,000 people, another putting the number of tech firms in London as a whole at 88,000 in 2012, up from 50,000 in 2009.

What is not clear is whether it is Tech City that has made much of this happen. The only academic study of the cluster I could find points out that a vibrant hi-tech scene had been flourishing in the area since the late 1990s. Max Nathan and Emma Vandore in a report for the Spatial Economics Research Centre find that firms stick in very localised clusters - they show no enthusiasm for moving to the Olympic Park.

Image caption "Silicon roundabout", London: Has a "cluster policy" had any impact on the city's tech sector?

The companies also have mixed views about the Tech City initiative, some welcoming the spotlight on the area, others dismissing it as the government jumping on the bandwagon. There are also questions from the authors about what are described as "the unstable politics of Tech City", with the two key Number 10 officials who had driven policy, Steve Hilton and Rohan Silva, now out of the government.

The researchers warn that around the world the jury is out on whether cluster policies work, though they are becoming more popular. In a time of austerity, focusing regional development money on a few areas and industries may look more cost-effective.

The government says it will spend the same amount on TechNorth as it has on Tech City. Far more important than taxpayers' money, however, may be the willingness of venture capital to venture North. The main complaints from the TechCity companies interviewed in the SERC report were about availability of skilled workers and access to capital. When Nick Clegg talks to technology firms at the Sheffield launch of TechNorth this morning, you can bet the same issues will come up.