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A decade long software revolution – how the UK has become a global tech hub

(Image credit: Image source: Shutterstock/everything possible)

The UK is Europe’s top scaling tech nation. We rank third in the world for tech unicorns, falling only behind China and the United States. The sector has created over 2.9 million jobs on home soil and has grown by a remarkable 40 percent in the last two years alone. By no means is this success confined to the capital. It is often overlooked that Manchester is the fastest growing tech cluster in Europe. Digital technology is Scotland’s fastest growing sector. Across the UK, the software sector continues to grow from strength to strength. The rise, power and influence of UK software is remarkable.

At the center of this meteoric rise to becoming a global technology leader is the development and harnessing of software. The software sector has been among the UK’s most innovative. While many industries are facing the harsh reality of the Covid recession, the UK’s tech sector is demonstrating greater resilience than most and continuing to grow. According to Tech Nation, there has been a significant rise in vacancies in UK tech. We have also seen significant rises in the valuations of many tech companies as the lockdown accelerates structural changes and changes in consumer and business behavior that are increasing our reliance on technology.

The UK Government over the past few decades has done an excellent job fostering an innovative environment. So, how have policymakers rewarded innovation?

First, Government schemes such as R&D tax credits have played a huge part in supporting the software sector and stimulating its growth. Every UK software company benefits from innovation. It represents a cash cow, not only down to the new revenue streams brought in by improved products and services, but also because of the tax claims. The depth of software development activities that qualify under such schemes is significant.

Missing out on opportunities

Take blockchain for example. The complex application of new blockchain technology is likely to meet the requirements for R&D tax relief. Quicker transaction speeds, supplementary security features and better data quality are all recognized under the scheme. 

The Government also offers tax claims for another key area of software development: data. The area is on the cusp of transforming companies through improving operations and making faster, more smarter decisions. Across the retail, telecommunications and healthcare industries to name a few, data is becoming utilized at a breakneck speed. Those companies who participate in unique areas of predictive analysis or improves its performance in organizing and retrieving data can claim tax relief. Simply handling larger volumes of data opens the door to R&D claims.

The Internet of Things (IoT) is an additional software arena that could qualify a company in that space for R&D claims. Enhanced speed of a device, security improvements in data collection or improved portability of hardware are all rewarded under the scheme.

The list goes on and on. Whether a software company is encouraging virtual reality adoption, improving embedded systems or developing video games, it could be missing out on a huge opportunity for cash relief. Whilst the Government has played a role in encouraging research and development across different sectors, such expenditure made up only 1.67 percent of gross domestic product in 2016. To maintain our position, the UK must continue to invest more in innovation.

The UK has become a center of software talent. This is an essential pillar for the industry’s success. Cyber, AI, and Cleantech all feature in the top ten sectors for employment in high-growth tech firms.

The Government has played its part in providing a hotbed for the development and retaining of top software developers. For instance, The UK is home to the world’s first technology visa that has enabled world class technology professionals to move to the UK, bringing their cutting-edge expertise, creativity and innovative ideas. One concern with regards to talent is the Government’s new points-based system of immigration. It sends the wrong message to tech professionals across the world and dissuades them from setting up shop in the UK, whilst also pushing overseas undergraduates away from UK companies at a time when it is vital to ensure that the UK maintains a global appeal.

Remaining the global leader

Further education is central to cementing the UK’s position as a leader in tech talent. The UK boasts world-leading universities such as Oxford and Cambridge, as well as influential computer science departments in Imperial College London, the University of Edinburgh and Manchester, taking the lead in training the next generation of UK software innovators. With Brexit around the corner and the continued race to develop the fastest and high-end technology, the software industry faces its fair share of challenges over the coming years. Similarly, with calls emerging for stronger governance and challenges of cyber security, it is vital that the UK continues to attract the best talent to support its most innovative sectors.

The open distribution of technological information, data and resources across borders is vital if Britain is to maintain its position in a post-Brexit world. The Department for Digital, Culture, Media & Sport recently set up the International Tech Hub Network (ITHN) to forge innovation partnerships between the UK and global tech sectors. Whilst currently hindered by the pandemic, the network saw immediate success, encouraging businesses to tap into overseas markets and work in partnership with other countries to build and expand digital ecosystems. For instance, the TeXchange conference in London earlier this year brought together innovation, forward-thinking healthtech start-ups from across Israel, Nigeria, India and South Africa. The three-day conference saw leading tech firms share intelligence on AI software in healthcare which technology will see the early detection of diseases.

As we emerge from the Covid crisis, it is vital that the UK remains a global software leader. It is no coincidence that the sector has continued to perform strongly in recent months, with this success being driven by dramatic changes in consumer behavior. However, to continue its dominance, the Government must reward and nurture those firms that are creating innovative solutions to the country’s biggest challenges.

Radeep Mathew, Head of Consulting, Leyton (opens in new tab)

Radeep Mathew has a passion for all things technology and innovation, he has lead Leyton UK's consulting team for over nine years and has prior experience from Capgemini and Infosys Technologies.