Can the North’s Technology Clusters Play a Starring Role in the Northern Powerhouse?

November 19, 2015

Last month the North East of England and the Tees Valley became the latest regions to conclude devolution deals with Westminster, giving the regions decision-making powers on issues such as transport, employment and business support in return for agreeing to be run by directly elected mayors.  The agreement means that the North East Combined Authority will receive £30 million a year over the next 30 years and the Tees Valley Combined Authority will be given access to £15 million a year over the same 30-year period. The devolution deals follow agreements reached by the Treasury with Greater Manchester and Sheffield, reinforcing George Osborne’s commitment to building a ‘Northern Powerhouse’ and presenting an opportunity for the North’s major cities to plot their own course towards growth and economic prosperity.

Whilst the North’s major cities are perhaps best known for their industrial heritage, in recent years cities such as Manchester, Newcastle, Sunderland, Leeds and Sheffield have been quietly establishing themselves as major centres in the UK’s digital technology landscape.  Despite the growing reputation of these regions, a high concentration of the country’s leading technology companies still choose to base their businesses (and the jobs and prosperity that follow them) in and around the capital and the M4 corridor.[1] Proponents of regional devolution have frequently argued that support for the regions’ technology clusters should form a central strand of any development strategy for England’s northern cities. There are good reasons for such an argument – the technology sector has a proven track record of developing the high-growth companies that can deliver private sector job creation.[2]  Will empowering the region’s local governments with greater devolved powers help their respective technology clusters become a key part of the government’s plans to boost economic growth in the North of England?

A devolution revolution?

In order to thrive, tech clusters must find a way to overcome the challenges specific to their region whilst continuing to play to their natural strengths in specific industry disciplines.  Having a directly elected mayor will hopefully provide the private sector with much needed direct accountability and clearer lines of communication to get things done. A mayor with greater devolved local powers over economic development, transport infrastructure and investment will be better placed to respond to local priorities. The devolution deal offers the potential for greater autonomy which should give each cluster the ability to compete on its own terms, maximise its strengths and tackle regional issues in a way that a distant central government never could. The detail around the scope of the mayor’s role and powers in the deals is still yet to be fully articulated and it is critical that the position confers sufficient decision-making powers to enable the directly elected representatives to make a real difference.

Westminster’s most recent devolution deal has the potential to change the political and economic landscape of the North East and this can only be good news for its technology cluster. It is important to remember however that no single cluster in the North’s major cities (yet) has the critical mass of skills, investment and businesses needed to compete with the world’s leading technology centres on its own. Whether they like it or not, economic globalisation means that no cluster is exempt from the need to compete with other international centres of excellence and each must strive to find ways to differentiate themselves from the competition. To that end, each of the North’s cities must look outward beyond their own regional boundaries for opportunities to collaborate with clusters in other northern cities (and beyond). The wider northern region stands to benefit enormously if its cities can effectively coordinate their efforts on areas of mutual strength. By the same token, the North should not shy away from healthy competition between its cities; whilst many of the North’s cities would struggle to achieve a competitive advantage on their own, interaction with other regions on common areas of interest has the potential to create a greater combined value proposition than could ever be created by any one city without interaction.

Regional devolution is undoubtedly a positive move towards creating a meaningful Northern Powerhouse but further investment is needed from central government to really make it happen. Poor transport links still hold northern clusters back from sharing their wealth of resources, people and ideas and major infrastructure investment is needed to create a powerful connected cluster. At present, Liverpool and Newcastle are more than 160 miles and three hours apart by either car or train. Companies based there may well find it easier to get to London than to get to another northern city, which illustrates why better transport links across the North will need to form a key part of this new strategy. Similarly, whilst the government’s forthcoming Universal Service Obligation plans are a welcome step towards superfast broadband connectivity, the current lack of fast broadband coverage in every part of the country remains a barrier to progress for many digital SMEs.

Similarly, the concept of a wider northern technology cluster has not yet been fully communicated to the world at large and the government must work with the regions to develop a compelling brand around a Northern Powerhouse that promotes to an international audience the combined strength of the clusters in the northern cities. The recently formed Tech City offshoot Tech North has a remit of coordinating the existing digital technology expertise of Manchester, Leeds, Sheffield, Liverpool and Newcastle (among others) and has the potential to act as a catalyst for the brand development.

Time to embrace friendly competition?

Legal (and other) professionals practising within the IT sector in the northern regions can play an important role in helping the northern clusters reach their full potential. As an IPIT practitioner based in Newcastle, it is apparent to me that far greater collaboration and coordination is needed between the professional community in the North. In London and the South East, the digital technology ecosystem supports a highly visible network of specialist legal providers that service the needs of technology companies. That network also facilitates the sharing of best practice, education and standards between its members enhancing the quality of advice offered to the technology companies they serve. Whilst there is no shortage of specialist technology lawyers in each of the North’s cities, their services are, in contrast to the City, often poorly signposted to local businesses and regional professionals lack an effective network within which to share ideas, skills and knowledge.

In order for the North’s technology centres to truly grow in maturity, it is essential that each cluster develops an accessible professional services infrastructure that can readily provide its technology businesses with specialist advice on their doorstep. For this to happen, the regional professional service networks must improve knowledge and skill sharing by collaborating with each other and reaching out to more established networks that exist nationally and internationally. In contrast to the technology clients that they serve, many professional service organisations have historically shied away from inter-organisational collaboration, at times viewing it with suspicion. Perhaps this view is becoming increasingly outmoded; if the north’s professional service community can effectively collaborate to fully support the needs of their technology businesses, they contribute towards the creation of a powerful technology proposition that is greater than the opportunities that they could ever create independently without interaction. The whole of the north’s professional services community stands to benefit if the technology businesses of the northern cities are supported to reach their full potential.

Whether one looks towards the regions’ cities to participate in deeper collaboration and competition or looks towards central government for capital investment and support, it’s clear that all interested parties need to work towards building an infrastructure (both physical and digital) that can harness and support the combined technology capabilities of the wider Northern Powerhouse. It had been said that clusters become greater than the sum of their parts when they break down silos of knowledge and skills. As legal professionals practising in IT in the North, it is our responsibility to build the infrastructure of professional support needed to give the North’s technology businesses easy access to the specialist knowledge and skills that they need to compete on the world stage.

Antony Hall is a Partner and Head of the Commercial Services Team at Mincoffs Solicitor LLP. The Commercial Services team at Mincoffs is one of the North East’s leading specialist information technology legal teams and was recently shortlisted nationally as Regional Firm of the Year for Technology, Media and Telecoms in the Legal 500 UK.

[1] KPMG, ‘TechMonitor UK: Understanding tech clusters and tracking the UK tech sector’s outlook for employment and growth’, 2013

[2] Digital companies are growing faster than the average rate of business growth across the economy. The percentage growth of digital jobs over the next six years is expected to be higher than that of all other occupations combined (Tech City Report: Powering the Digital Economy 2015)