05 June 2023
How can the UK position itself as the next powerhouse in tech innovation?
In The Real Economy’s latest research into the UK’s evolving workforce a key theme of globalisation has emerged. Super charged by events during 2020 and 2021, and enabled by technology, working flexibly, hybrid or totally remotely are now commonplace in workforces across the globe.
In our recent research, 76% of the middle market found competition for employees with other employers in the same industry was a key issue. In our survey of over 400 middle market business leaders, competition for employees with others in the same geographic area was an issue to some extent or a great extent for 80% of respondents. So, with so many of the middle market struggling to compete in the war for talent – where can they turn to in order to find the skills they need to achieve their strategic goals?
The UK’s Technology sector is impacted more than most here. As an industry that thrives on innovation, creativity and creative destruction a skilled workforce is crucial. Maintaining a balance of retention against productivity has been a challenge. With many of the technology behemoths mandating a full time return to the office, smaller tech firms are using the benefits of hybrid, remote or even abroad working to try and entice talent into their organisations. They are also looking further afield for the skills they need. Well publicised layoffs in Big-Tech from mid-2022 have replenished talent pools in an industry that was becoming defined by soaring costs of employment and fierce competition in all business functions.
For UK tech a key action is to look beyond UK borders. UK Tech is not alone in this need - in the last 12 months across all industries 19% of the businesses we surveyed have sourced a lot more labour outside of the UK, and 33% have sourced slightly more labour. Of the businesses sourcing labour from overseas, 79% are sourcing labour from the EU, 25% from non-EU countries, 13% from the rest of the world.
Healthy levels of skilled immigration is a good thing. Skilled migration enhances the wider ecosystem, bringing in diverse ideas and innovation. And this is particularly important in a sector that is defined by pushing boundaries.
With healthy levels of inward immigration being vital for growth – how does this play out in the UK’s technology sector?
Immigration levels have risen in line with a growing UK technology economy
Almost 54,000 international workers applied to work in the UK’s technology sector and migrated in 2022. The number has increased each year since 2017. Research from TechNation indicates that during 2022 4.7m people worked in the UK Digital technology economy – rising from 2.69m in 2017. On this basis immigration levels have risen broadly in line with increasing employment in the technology sector.
The increase in skilled workers in 2022 is the largest year-on-year increase – over 13,000 extra people. The coronavirus pandemic in 2020 provides an explanation for dips in migration through 2020, when global mobility of people was significantly restricted. The larger increase in 2022 may be partly explained by a post-pandemic lag, suppressing numbers in 2021 ahead of a rapid jump in the latest year on record.
However, with almost 5m people employed in the UK’s technology sector an inbound immigration percentage barely above 1% of the total levels of the industry employment does seem very small. One of the key benefits of healthy immigration is their impact in sharing new ideas. Smaller numbers of migrant workers significantly decreases the odds off creating a meaningful impact across the technology ecosystem in the UK.
The software and IT architecture skillset drives migration numbers
The classification of these workers includes:
- IT/Telecoms directors;
- programme managers;
- software development professions; and
- IT operations technicians.
Over 39,000 professionals work across the two subsets of IT business analysis/architecture and software development. These skills are especially crucial as each year our reliance on digital technologies increases
The importance of migration from Asia
The vast majority of skilled technology workers are migrating from Asia – over 43,000 people. Within this population almost 40,000 migrated from India. In this area the UK is comparable to the United States. A report from NFAP indicated that 66 one-billion-dollar companies had Indian founders. This is followed by 54 from Israel and 27 from the United Kingdom.
Post-Brexit, skilled migration from the EU has risen but still only constitutes a little over 2,000 workers in 2022. In fact, relatively few workers migrate from countries outside of Asia. This includes very small numbers of migration from North America. For the United Kingdom, a healthy pipeline of talent and ideas from the world’s leading technology economy will be vital if it is to compete on a global level.
‘The next Silicon Valley’
Chancellor of the Exchequer, Jeremy Hunt, has made his vision clear, he wants the UK to become ‘the next Silicon Valley’. To support this aspiration, during the Spring Budget Statement, Hunt stated that the Government intends to make the UK a more attractive place for technology businesses. To do this, the UK will need to meet the needs of these demanding businesses -starting with a world-class workforce. Healthy immigration will be key.
Immigration has been key to the success of the Tech sector in the US. A report by the National Foundation for American Policy in 2022 found that, of the 582 start-ups valued at $1bn or greater in the US over 55% had at least one immigrant founder. Of these 319 companies, 48% were founded in the Bay area, including Stripe, Bex and Instacart.
Robust levels of skilled immigration is a good thing. Skilled migration enhances the wider ecosystem, bringing in diverse ideas and innovation. This is particularly important in a sector that is defined by pushing boundaries.