Blog: A deep dive analysis of the West Midlands’ technology sector

By Richard Hutchins, Chief Operating Officer, West Midlands Growth Company

From data analytics to cyber security and fintech, the latest West Midlands Deep Dive Report produced by the West Midlands Growth Company focuses on the region’s technology and digital sector. Developed in partnership with Birmingham City University (BCU), it analyses the trends that will impact the region’s business landscape during the next 10 years.

Theresa May has described the technology industry as a “great British success story”, outlining how tech and digital will be a priority for the UK after leaving the European Union. This report – which covers the West Midlands Combined Authority (WMCA) area – reinforces the potential of the tech and digital sector, the important role it has played in the country’s economic recovery, and how this growing industry will evolve into a much greater contributor to the West Midlands and UK economies.

This thriving sector is well placed to create thousands of new jobs and generate greater economic outputs in the coming decade, according to the report.

During the next 10 years, GVA generated by the sector in the West Midlands will rise by £1.3 billion (20% or 2% per annum) from £5.7 billion to £7 billion, with the potential to peak even higher, at £7.9 billion. Employment in the sector across the region is expected to rise by almost 14,000 by 2025 – to just under 84,000 employees. The rapid pace of innovation, substantial market opportunities and significant potential to attract inward investment into this sector, will underpin this rapid growth.

So what exactly are the drivers of growth within this sector? How do we ensure the region is well-equipped to meet this demand and capitalise on the growth potential of technology?

The innovative use of digital technologies can disrupt existing business models and value chains, but it also has tremendous potential to create value and boost competitiveness and productivity. Our findings show that the region’s tech and digital firms appear to be clustering around key innovations to exploit their potential, such as fintech and blockchain technology, cyber security, data analytics, The Internet-of-Things (IoT) and digital care services.

Several areas within the West Midlands are home to emerging tech and digital ecosystems. Firms in Warwick, Leamington Spa and Stratford-on-Avon, for example, excel in games design and development, while companies based in Telford and Solihull are more likely to specialise in apps and software.

It will be unsurprising that the need to upgrade cyber security is a key driver of investment and innovation in the sector. As private, public and civil institutions become increasingly digitised and dependent on information systems, they become more vulnerable to attack. Another area of vast potential is The Internet-of-Things (IoT), which allows equipment and assets to ‘talk’ to one another via wireless technology and then to be transmitted back to a collaboration platform. This allows people to monitor productivity, quality control, safety and inventory – and in turn, improves project efficiency, timelines and risk management. Clusters of firms specializing in cyber security and IoT are emerging in Redditch, Telford, Solihull and Tamworth.

Meanwhile, blockchain technology – a public digital database shared among a network of computers worldwide – offers secure, fast and efficient transactions to financial firms. This sub-sector is becoming a dominant area of focus in West Midlands cities with a large Business, Professional and Financial Services (BPFS) sector, such as Birmingham for example – home to the UK’s largest BPFS hub outside London.

Access to the right skills and talent can often be main reason why a tech firm will locate in the West Midlands. Currently, the region employs more than 70,000 people in the industry, of which a large proportion, 55%, are in highly skilled and well-paid jobs.

There is an emerging demand for critical technical skills and expertise – which account for 85% of hard-to-fill vacancies in the sector. Notably in areas such as Data Analytics, Big Data and Cloud Computing, there is a need for the region to invest in training and workforce development, to maintain the strong performance of the tech and digital sector. More than a third (34%) of roles in the local sector require a degree. Our internationally renowned universities – at Aston, BCU, Birmingham, Coventry, Warwick and Wolverhampton – are vitally important in ensuring the local workforce is well qualified to meet these demands.

Looking internationally, inward investment has been a key driver of growth in the region’s tech and digital sector. The West Midlands secured a record 111 foreign direct investment projects in 2016, according to accountancy firm EY – more than any area outside London and Scotland.

Digital firms will have an opportunity to exploit a new wave of growth with an acceleration of technology adoption in emerging markets such as China, India, and Russia. Such opportunities are being driven by the young demographic in these countries, large scale broadband penetration, rapid smartphone adoption, and rising levels of disposable income available. The opportunities in the West Midlands, nationally and globally, are vast.

To download a copy of the West Midlands Tech and Digital Deep Dive Report, visit the Business Birmingham website.