An explanation of some of the differences in recent reports on the UK's 'tech' sectors
Guides to the tech economy are, it seems, a bit like buses: you can be waiting for a while, then three turn up at once. Last week saw the release of Tech City UK’s Tech Nation report on the Digital Economy and the week before we published our report on the Geography of the UK’s creative and high-tech economies. Late last year we also published a report by NIESR on using big data to map the UK’s information economy.
These three new publications on related areas reflect the increasing policy interest in this space. To put the reports in context, this post discusses some of the differences in their scope, their findings on sector employment and on where concentrations of the different kinds of tech activity are located (there are some similarities in the places identified).
A key difference between the reports is how they define the areas they analyse. The Tech Nation report’s focus is on digital technology businesses. The Nesta geography report analyses the UK’s creative and high-tech industries: defined in terms of industries that respectively employ a high proportion of workers in creative (but not necessarily digitally related) roles or Scientific Technical Engineering and Mathematics (STEM) roles. The NIESR report analyses those businesses (both software and hardware related) that produce Information and Communication Technologies (ICTs).
The Tech Nation report finds that 1.46 million people are employed in the UK’s digital technology industries. Nesta’s geography report finds there are:
with 0.54 million jobs in the intersection of the two (These being ICT related).
In terms of industry employment estimates, although a complete list of the industries these are based on is not given in the Tech Nation report, the large difference between Nesta’s high-tech jobs number (it's the number of jobs, as second jobs are counted) and Tech City UK’s digital technology employment figure is probably due to the former including employment in several manufacturing industries (e.g. pharmaceuticals and aerospace) which fall outside of Tech City UK’s digital focus.
The creative industries definition used in the Nesta report (which is the official UK Government creative industries classification) is in some ways closer to Tech City UK’s focus (it includes, for example, four out of the 12 standard ICT-related industry codes in the national accounts), but it also incorporates a number of creative content industries that are not included in Tech Nation.
Total UK information economy employment figures are not covered in the NIESR report, but the sector is estimated to account for 8.9% of employment in the firms in the Companies House data that is examined., A back-of-the-envelope extrapolation of this figure from the NIESR report to the UK workforce suggests 2.69 million jobs in information economy businesses. However, a caveat to this extrapolation is that not all employment is via companies registered in Companies House, and as larger companies face more stringent reporting requirements the employment data is more likely to be from larger companies which may bias this estimate.
All three reports highlight the important tendency of the UK’s creative and tech businesses to cluster in specific areas, reflecting the efficiencies and knowledge exchange that companies can receive from locating near one another. The identification of these areas is an important step to ensuring that spatial policies such as the Regional Growth Fund and public investment in infrastructure like high-speed broadband are effectively targeted.
Differences in definitions aside, all the reports identify roughly the same parts of the UK as clusters. Of the 21 areas identified as tech clusters in Tech Nation most are either included, subsume, or fall within, the areas identified in the longer list of creative and/or high-tech hotspots in Nesta’s study. These areas being: Glasgow, Edinburgh, Belfast, Leeds, Oxford, Reading, Inner London, Brighton and Hove, Bristol and Bath, Birmingham, Greater Manchester, Great Malvern, Cambridge, Norwich, the North East and South Wales.
Tech Nation notes that its list of clusters is not exhaustive and, indeed, mentions in the appendix Coventry and Aberdeen which are also both covered in the Nesta and NIESR reports. Of the top ten areas identified by NIESR’s report (either in terms of having the most information economy businesses or an area’s proportion of businesses that are information economy businesses) all fall within the areas identified as hotspots in the Nesta report.
An important consideration in comparing the reports is that they do not use exactly the same geographical units e.g. Nesta’s analysis identifies Berkshire as a hot spot, as opposed to Reading (which appears in both NIESR and Tech Nation); and Teeside, rather than the North East (Tech Nation) and Middlesborough (NIESR).
It’s great that novel data and analysis can improve understanding of dynamic parts of the economy that are of increasing policy interest. This is one of the reasons why at Nesta we invest in the development of methodologies and statistics for identifying emerging areas. However, in interpreting the data it is important to understand the similarities and differences between approaches adopted. The terms ‘digital’, ‘information’ and 'high-tech' industry/business are often used synonymously in public debate and research – but as shown here, they correspond to different, albeit closely related, sets of things. This ambiguity does not assist the clear and consistent formulation of policy. It would be helpful for Government to develop standardised terms in this area, as has already happened for the creative industries. If not standardisation, there is a need for clarity on the methodology, including the criteria used for analysing these sectors.
The reports also highlight two important changes in how data is increasingly presented and analysed. A welcome feature of the Tech Nation report is that it has been accompanied by an online interactive map. This displays the location and characteristics of 47,900 digital companies, and helps make the data more useful to policymakers and other users at national and local levels. This is part of a wider trend in making data available in more interactive formats, such as the Office for National Statistics' (ONS) interactive site and our recent creative economy analysis.
Another trend is the increasing use of data sources in this area outside of official Government surveys and records. The NIESR and Tech Nation reports both involve ‘big data’ analysis which combines data on official data sources with other data such as that collected from websites. This kind of approach has the advantage of allowing a richer picture of economic activity to be obtained than from conventional surveys. However, because of its complexity, and sometimes reliance on proprietary algorithms, it is arguably less transparent than official statistics which are, by their nature, collected on a standardised basis. How this kind of issue can be addressed is something we are aiming to explore at Nesta in the next stage of our ongoing project on using new data sources to map the video games industry.
Tech City (2015), ‘Tech Nation, powering the digital economy’, p8.
 The Nesta report also provides estimates of creative and STEM workers outside of the respective industries. The term ‘creative (high-tech) economy’ employment is used to describe the total employment in these industries and that of creative (STEM) specialists in the wider economy). This distinction is important as roughly as many creative (STEM) jobs are outside the UK’s creative (high-tech) industries as within them.
 Nathan, M., Rosso, A. and Bouet, F. (2014),’Mapping information economy business with big data:findings from the uk', p39.
 The NIESR report estimates that there are a higher number of firms identified in the Information Economy when using data analysis of unstructured sources such as company websites and social media (combined with official data sources such as Companies House) than when compared with an estimate based on the official classifications in the BIS Information Economy Strategy (2013). It is the former estimate that this number is based on.
 Though an important point noted by our research is that an agglomeration of firms need not necessarily operate as a cluster, e.g. if there are low levels of cluster awareness amongst businesses – Chapain et al (2010), Creative Clusters and Innovation, Nesta. http://www.nesta.org.uk/publications/creative-clusters-and-innovation-report
 Nathan, M., Rosso, A. and Bouet, F. (2014),’ Mapping information economy business with big data: findings from the uk', pp.41-42.
 The Nesta report uses the European Union NUTS3 geography in its analysis. This is the highest spatial level of resolution used by the European Union in its geographical units. The Tech UK report makes use of the European Union NUTS2 geography, but does not use this consistently throughout. The NIESR report analysis is based on Travel to Work Area (TTWA) geographies.