Technology is driving the UK economy, with hubs appearing across the country. Manchester is one city leading the way in digital tech
Manchester, famously, was the birthplace of the first industrial revolution, making its name as an international centre for the textile industry and manufacturing. Over 250 years later, Manchester is now leading the way again as one of Europe’s leading hubs for cutting edge digital tech.
The digital tech industry in the North West turned over £4.98 billion in 2018 and Manchester boasts the largest number of digital workers in the UK outside of London. From fashion to Fintech and from nanotechnology to new media, the city region now boasts a wide portfolio of digital growth areas and has successfully positioned itself as the UK’s second city for tech.
Manchester’s manufacturing past hasn’t been entirely forgotten – fast fashion tech companies are still big business. Pretty Little Thing, the Manchester-based online retailer, was acquired by fellow local retailer and ‘unicorn’ BooHoo in 2016, and was ranked as the fastest growing fashion brand on the web in a 2017 Fast Fashion report from Hitwise. The company shows no sign of slowing down either, with expansion planned across the UK and US.
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But the secret of Manchester’s digital tech success has been to broaden its horizons and cultivate a variety of cutting edge areas. Two of the largest industries in the city – digital technology and financial services – have come together, resulting in a cluster of Fintech businesses. Manchester-based AccessPay, a specialist in cloud-based payments and cash management automation, is one of the fastest growing Fintech businesses outside London and secured £9 million venture capital investment earlier this year. The market disruption caused by these ambitious new companies has led to increasing appetite to invest in Fintech. This has manifested itself through acquisitions, joint ventures, industry partnerships and an abundance of incubators, accelerators and shared working spaces, many of them sponsored and supported by banks keen to understand and invest in new products and services generated by Fintech.
In January, Yorkshire Bank opened its free-to-access B Works space in the heart of Manchester’s central shopping district. B Works provides a shared space for students, start-ups, SMEs and the self-employed to learn, work and bank at the same time. Towards the end of last year, Barclays’ flagship Eagle Labs venture arrived in the city centre, providing further incubator space and support for start-ups. The Eagle Labs in nearby Salford Quays is already well established and operates in partnership with The Landing at MediaCityUK, now home to BBC and ITV studios.
Strong support for fast growth digital businesses is on hand from industry and city institutions including the City Council and Manchester’s world-renowned universities. Manchester Science Partnership offers campus facilities in Manchester and Cheshire with incubation, laboratory, office and meeting space available to businesses at every stage of their lifecycle – from start-up to global corporate. Most recently in June this year, Vodafone launched its Digital Innovation Hub in The Landing, providing access to its 5G test bed for fast growth tech companies. A growing range of programmes and events help to bring the Manchester tech community together, including those run by the universities – MMU has launched the UK’s first FinTech Masters course – Manchester Digital, Tech Nation, Fintech North, and the Manchester Tech Trust among others.
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The commercial sector is also responding to demand; Bruntwood SciTech have brought forward the next phase of their multi-million pound development, Circle Square, to provide a variety of workspace options for businesses keen to have a base in the region. The Circle Square development is a short walk away from the city centre campuses and subsequent talent pool of Manchester Metropolitan University and the University of Manchester on Oxford Road.
Entrepreneurs launching or investing in businesses are being drawn to Manchester to take advantage of the growing investment opportunities in the city region. Historically, the North West region has been dominated by private equity, with PE houses such as Palatine, Living Bridge, North Edge, LDC and NVM leading the greatest investment activity in the UK outside London. Investors now have a healthy appetite for investing in much earlier stage companies, including seed funding, “Series A” and “Series B” rounds. £226.5 million of venture capital investment was injected into northern businesses in 2018 across 100 deals, according to the latest figures published by KPMG.
The region’s economy has been boosted by funds such as the North West Fund, the Greater Manchester Investment Fund managed by the Greater Manchester Combined Authority and, of course, the Northern Power House Fund (NPIF). Enterprise Investment Scheme (EIS) funds are also helping to grow a vibrant venture capital ecosystem.
Praetura Ventures, for example, closed its 2019 EIS fund at a “record-breaking” £15 million in June 2019, which will be used to target around 10 high-growth early stage tech companies with strong management teams. There has been a recent surge in Venture Capital Trusts, offered by the likes of Maven Capital (who also manage the NPIF), Foresight (who recently invested in Nisha Katona’s casual Indian dining restaurant, Mowgli Street Food in both Manchester and Liverpool) and YFM Equity Partners (who have reported £230 million worth of deals and £100 million in fund-raises in the first half of this year and have recently doubled their Manchester team).
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It’s not just startups and scaleups that are attracted to the bright lights of Manchester. Major digital players are being drawn to the North West and away from London thanks to lower rents and a large pool of graduate talent. GCHQ has chosen to locate its new cutting-edge intelligence facility in Manchester. Moonpig has announced it will open a new tech hub in Manchester city centre, designed to “turbo-charge” innovation and personalisation for its business. The Hut Group is building a one million sq ft business campus at Airport City south of Manchester, the largest development of its kind in the UK, and fellow online retail giant Amazon is rumoured to be taking another 91,000 sq ft of space in Manchester.
Greater Manchester has become a main stage for leaders in the industry. It is one of the UK’s most successful city-regions; home to more than 2.8 million people and with an economy bigger than that of Wales or Northern Ireland. The region’s digital sector alone is estimated to be worth more than £3 billion to the UK economy. In addition, ten local councils have formed the Greater Manchester Combined Authority to work with other local services, businesses and communities to improve the city-region and co-ordinate their approach to growth and development. This joined up approach allows the region to make a strong case for resources and investment, focusing attention around the “Northern Powerhouse” brand.
The region boasts three internationally ranked universities and is only an hour away from graduate and post-graduate talent from other northern cities like Liverpool, Leeds and Sheffield, providing access to a steady flow of talent into the city. Manchester recognised early that solid infrastructure is key to business development. In the last 12 months, over 43 million travellers rode on the Metrolink tram system, which will add to its 93 stops around the region before the end of 2019. Further plans for a ‘London-style transport system’ for Manchester were announced last month and, as the biggest regional airport outside London, Manchester airport has seen a rise in trans-Atlantic flights and overseas investment, notably from China.
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Manchester has also established itself as a global cultural centre, with the football clubs, the musical heritage and showcase events like the biennial Manchester International Festival making Manchester a vibrant and exciting place to live and work. According to a study published in March 2019, over half (51%) of students from Manchester’s universities choose to remain in the city after graduation, second only to London in retention rates.
Students, businesses and investors alike are attracted to the all-round package offered by Manchester, which has proved itself more than capable of leading the “fourth industrial revolution” of digital transformation, much like it did the first time around.
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