Deloitte Outlines London IT Sector Challenges - InformationWeek

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Government // Enterprise Architecture
01:25 PM

Deloitte Outlines London IT Sector Challenges

U.K. has potential as a global tech hub, but is hindered by inadequate investment in science and startups, says report.

The London Tech City scene stands a very good chance of becoming a real generator of cash and jobs for the whole of the U.K. However, more needs to be done at a strategy level to make the capital a true digital hub.

That's the possibly encouraging thrust of a new study into London's digital economy prospects, "London: Enabling a World Leading Digital Hub," by consultancy Deloitte.

The report estimated that London's technology, media and telecoms (TMT) sector supplies a very healthy 8% -- £125 billion ($189 billion) -- of the U.K.'s total gross domestic product.

Deloitte also said the TMT sector is the second most productive part of the current London-only economic landscape, second only to financial services. Using 2010 data, it suggests that, per worker, a technologist is worth £51,000 ($77,140), a media professional £55,800 ($84,400) and a telecoms specialist £116,200 ($175,758) per year to the city's finances. Indeed, one in every 10 jobs in London is in TMT, while 28% of all the U.K.'s total TMT workforce is London based.

[ Want to know what's being done to prepare the future IT workforce? See U.K. Debates New Tech Education Standards. ]

The problem: "While London is well placed to exploit its status, resources and diversity, there is no guarantee it will achieve its ambitions," caution the authors, who point out specific challenges in the area of skills and finance in particular.

In the first instance, the authors bemoan the fact that the country lags at 16th in global achievement in science (OECD figures) -- which translates, they hold, to "the U.K.'s lower tech R&D intensity as a proportion of GDP" with competitors such as the U.S. and Israel.

And in the second, echoing other warnings, the City of London's "tepid" commitment to investing in startups is also cited as a factor holding back the city's ambitions. "The estimated value of technology venture capital investment in the United Kingdom is one tenth of that in Silicon Valley," it stated, when the relative size of the two nation's economies are factored in.

Though London will not ever realistically compete directly with Silicon Valley, "Silicon Roundabout" -- the semi-humorous name for Tech City, the regenerating area east of the city that is home to more and more startups -- may "launch the next wave" of "innovative specialist digital businesses."

The study was produced by Deloitte in partnership with tech firms EMC and Intel, as well as London First, a nonprofit "with the mission to make London the best city in the world in which to do business." The report suggests a range of practical policy steps the government and city authorities might try and pursue.

These include more active support from the British financial community and entrepreneurs to invest in and develop these companies.

The prize: London's burgeoning indigenous tech scene could provide growing economic payback for the rest of the county. "As London's Tech City attracts inward investment and promotes exports, the wider U.K. 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," contended Jolyon Barker, global lead for Deloitte's TMT industry.

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