UK technology job creation outpaced other sectors for four years

Rates of job creation at UK technology companies have outpaced the private sector as a whole for the past four years, according to the first detailed portrait of employment in the sector.

The number of jobs in the sector now exceeds 1m out of a total of 28m employees across all UK sectors, compared with 915,000 out of 27m in 2010, confirming that technology is a significant employer in Britain despite fears that rapid growth was concealing low job numbers.

The difference in growth rates was most striking in the aftermath of the financial crisis, when the tech sector saw a shallower downturn and was quicker to recover than the wider economy.

The report compiled by data firm Markit for KPMG shows the growth has been sustained since then. Jobs in the tech sector rose 4.3 per cent year on year in the first half of 2013 compared with 0.9 per cent jobs growth for the private sector as a whole.

The report, Tech Monitor UK, also features a detailed geographical breakdown of tech sector clusters in the UK.

The breakdown by local authority shows that the area with the highest concentration of tech sector jobs is Wokingham in Berkshire, which includes a business park that is home to the UK headquarters of Microsoft and Oracle. The proportion of tech jobs there is five times the national average.

The M4 corridor dominates Britain’s tech economy; six of the top 10 local authorities with the highest concentrations of tech jobs are clustered around this motorway.

Rushmoor in Surrey is the second-highest ranked local authority. It includes the town of Farnborough, which hosts a number of tech companies at business parks such as the Farnborough Aerospace Centre.

Tewkesbury in Gloucestershire and Christchurch in Dorset had the highest proportion of tech workers outside the southeast.

In London, 21 out of 33 local authorities had a higher proportion of tech workers than the national average. In the capital, the local authority with the greatest concentration of tech workers is Richmond upon Thames.

The Tech City area around Old Street roundabout in London does not feature as a distinct area in the report because it is split between Hackney and Islington.

Scotland and Yorkshire had the lowest proportion of tech workers compared with the national average. The study did not cover Northern Ireland.

Britain’s homegrown tech sector is still awaiting its first initial public offering. London-based developer King, creators of the game Candy Crush Saga, is reported to have filed confidentially for an IPO in the US.

The Tech Monitor UK report, published on Monday, measures job creation according to the purchasing managers’ index data gathered monthly by Markit. The data show that the tech sector had an average PMI reading of 54.4 this year compared with 51.3 for the UK private sector as a whole.

Output growth has accelerated sharply following a relatively soft patch at the beginning of 2013, and the upswing in the sector during August was notably faster than seen across the wider global economy

The gap between tech employment and the wider economy was greatest in 2010, when the tech sector reading was 54.1 compared with a UK average of 50.2. Any figure above 50 indicates growth.

The PMI data draw on figures from 150 tech companies within Markit’s regular survey panel of more than 1,000. The businesses operate in the IT sector, tech testing, communications or are manufacturers of tech equipment. Markit intends to publish quarterly PMI figures for the tech sector.

The report finds that business activity growth at UK tech companies is the fastest since May 2010. It says: “The figures show that UK tech company output rebounded strongly after the global financial crisis . . . and has now expanded throughout much of the past four years.

“Most recently, output growth has accelerated sharply following a relatively soft patch at the beginning of 2013, and the upswing in the sector during August was notably faster than seen across the wider global economy.”

Tudor Aw, head of technology for KPMG Europe, said the findings confirmed the increasing importance of the sector.

Mr Aw said: “Yes it suffered a downturn when we had the financial crisis, but when I talk to colleagues in real estate or retail, it was a bloodbath [whereas] tech has a natural refresh cycle.

“You can’t go three to five years without having to refresh your equipment, particularly in a recession, for cost take-out, and to increase productivity. If you want to compete and stay on top, you’re going to invest in technology.”

While offshoring of tech jobs has continued, Mr Aw said this freed resources for companies to move up the value chain. “If you can save costs through outsourcing, there are funds for investment in R&D.”

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Thames Valley perks

Outside Jive Software’s plate-glass windows, cold autumnal rain is sleeting into a pond speckled with lily pads. Inside, a fridge is packed with free beer, on a breakfast bar are bowls of fruit and nuts, and a couple of employees are taking their break by playing football on a game console, writes Jeevan Vasagar.

“Nice cake, Debbie,” a worker tells office manager Debbie Howard, wiping away crumbs.

The Palo Alto company’s European headquarters, at Thames Valley business park near Reading, may endure British weather but it offers Silicon Valley-style employee perks.

An analysis of tech sector employment in Britain, conducted by Markit for KPMG, has revealed that the borough of Wokingham has the highest concentration of tech jobs in the country.

Thames Valley park, a 200-acre estate on the east side of Reading, is part of the explanation. It is host to the UK headquarters of Microsoft and Oracle, and many smaller tech businesses.

Jive Software, whose flagship product brings social networking techniques to internal corporate communications, was drawn to the location partly by proximity to other businesses. The company moved to the business park in July.

Mike O’Farrell, Jive Software’s director of global facilities, said: “We don’t necessarily recruit from other companies, but we’re looking for the same talent.

“Often the talent is looking in the same neighbourhood.”

We feel very strongly about collaboration. We want people to be sitting on a couch having a conversation over a soda and a snack as much as at a desk

Good public transport links were another pull factor; the business park’s managing agents provide a free shuttle bus to Reading town centre, which runs every six minutes at peak times, while London is about 30 miles away on the M4.

The decor in Jive Software’s offices is an upbeat mix of stripped wooden floors, white walls and furniture in vibrant pastel shades.

Around 50 employees work in a single, open-plan space, with meeting rooms around the sides and a break room – with pool table, TV, and sofas – at the front of the building. The informality is intended to encourage casual networking.

Mr O’Farrell said: “We feel very strongly about collaboration. We want people to be sitting on a couch having a conversation over a soda and a snack as much as at a desk.”

The company shares the robust growth expectations of the rest of the sector.

Markit’s research finds that 83 per cent of tech companies in the UK forecast a growth of business activity over the coming year, compared with just 5 per cent that anticipate a decline.

Across all sectors, 60 per cent forecast growth while 9 per cent are pessimistic.

Amanda Pires, Jive Software’s chief communications officer, said: “Our growth rate in the second quarter was 30 per cent. We continue to grow, and continue to hire all over the world as our business grows.”