The past 20 years have seen the Thames Valley develop from a relative backwater to become a vital European hub for the telecommunications and information technology industries.
Almost 80 per cent of inward investment to the region in 2006-07 was within the IT, software and communications sector and so vital has it become that it is sometimes nicknamed “Europe’s Silicon Valley”.
It is home to both extensive operations of the world’s largest names and the ambitions of start-up companies alike, with Vodafone, Siemens, Hutchison 3G and Ericsson just some of the many companies based there. Only this February, Research in Motion, maker of the BlackBerry mobile e-mail device, opened its European headquarters on Slough Trading Estate.
Sometimes the region’s nickname appears to take on a literal meaning as 50 per cent of new investments to the region comes from US west coast technology companies looking to expand into the UK and the rest of Europe. Microsoft, Oracle, Dell and Cisco Systems all have large research and development centres.
Smaller start-up companies from Europe, including France and the Czech Republic, are also attracted by the region. According to the annual investment review for the area published by the Thames Valley Economic Partnership, 54 foreign-owned, high-growth businesses have invested in the region for the first time in the last year.
Companies from around the world have been attracted by a skilled, mobile workforce, the transport hub of Heathrow, the proximity to London, competitive tax breaks and – especially for North American companies – an English-speaking population.
“More than 1m UK jobs depend on the success of the ICT sector which generates more than 6 per cent of GDP. Its importance to our economy is unquestionable,” says Lord Digby Jones, the former director-general of the Confederation of British Industry. “It is no coincidence that many ICT firms have their European HQ as well as their research and development operation based here,” he adds.
“The Thames Valley has been a feeding ground for ideas rather than a manufacturing centre,” says Karl Havers, head of Ernst & Young’s UK technology practice, and based at its Reading office.
The increasing convergence between technology and telecom worlds has created a wealth of opportunities that are being filled by small, dynamic companies.
The software industry in particular is rapidly growing as it evolves to become the “brain” within technology hardware. Last year saw 67 per cent of the investors looking to expand into the UK offering software related products and services.
As in previous years, companies from North America accounted for around 60 per cent of the new investment, but companies from the Asia Pacific region are also moving in. Japan’s Just Systems, which provides XML and service oriented architecture, is locating its European headquarters in Slough.
A virtuous circle has also been created in which companies are finding it easier to look for skilled local talent. According to the Thames Valley Economic Partnership, 55 per cent of the UK’s software workforce in the south-east is based in the Thames Valley.
Markets are also being created for ancillary and infrastructure services. Small companies, such as France’s Mobilgov, are striving to improve corporate and organisational security, both online and against the threat from the use of unauthorised equipment, such as PDAs, smartphones, USB sticks, and external and internal hard drives.
New datacentres are being built to contain the vast consumption of data from telecoms companies and internet service providers such as O2, Vodafone and Orange. IX Europe, bought last year by its US peer Equinix, will relocate its largest London datacentre to a new £15m ($29m) centre built in Slough.
Other companies in the region include Newbury-based Micro Focus, which supports and extends the life of legacy software based on Cobol software coding that still performs vital functions in large companies.
All have realised that it is vital to be physically located close to partners and resellers of their technology.
Yet the region’s fortunes remain closely tied to the world’s technology and telecom world. Old-timers remember that many US companies pulled out of the area in the wake of the dotcom slump, while even as recently as 2005, there was a surplus of office space.
Despite fears about a slowdown in global technology spending, there is little evidence of large-scale pull-outs, according to Mike Baker, partner at Strutt & Parker, the property consultants. Although overall office take-up for the region was down from 1m sq ft a year ago to 623,000, the computer and technology sector’s market share remained the same. “The sector is more than holding its own,” he says.
But Mr Havers at E&Y warns that the evolving nature of technology means companies also have to change, particularly in the type of staff they recruited.
“If you need to work across cultures, you need to get it right,” he cautions. “You will get all sorts of partnerships. If you’re selling a product, you’ll also need to sell the best service. You’re talking about trust and relationships.”