Regional spotlight: Why Leeds is a hotbed for tech scaleups
The first commercially successful steam locomotive was built in Leeds in 1812. Today, it’s full steam ahead for the West Yorkshire city’s tech ecosystem, which is producing trailblazing scaleups at an impressive rate.
For several years Leeds has had some of the fastest scaleup growth in the North of England – defined by companies that have achieved three years of 20% growth in revenue or employees.
Investors have taken notice. In the year up to September 2022, Leeds-based tech startups secured £288m in venture capital investment, up 88% on the year prior, one of the few cities to buck the funding downturn.
Combined, the so-called ‘Northern Triangle’ tech startups – those based in Manchester, Leeds and Sheffield – have raised £1.3bn in funding over the last five years.
“The Leeds tech ecosystem has come on in leaps and bounds and it’s no surprise to see so many of its tech startups are scaling up,” says Steve Harris, UK head of technology for SME and mid corporates at Lloyds Bank.
But what’s behind this growth, and what are some of the challenges that the Leeds tech ecosystem faces?
Institutions foster innovation
Leeds is at the heart of the Leeds City Region, a business-led local enterprise partnership that includes Bradford, Wakefield, Halifax and Huddersfield, among others.
Finance, business services and digital are three of the key economic drivers in the region. Looking at the city of Leeds specifically, there are clear strengths in fintech, health tech, and data.
Leeds tech has – in part – become strong in these subsectors due to national institutions that hold key offices in the city. They include NHS England and the Department for Work and Pensions, while large companies like Channel 4 and Sky’s digital technology division have also moved to Leeds from London.
Stuart Clarke MBE, co-founder of Leeds Digital Festival, says that startups and scaleups “have grown around their needs”. Clarke points to tech consultancy firms BJSS and Hippo Digital, along with data firms The Data Shed and Panintelligence.
NHS Digital, the IT and data division of the UK’s health service (which has since been merged into NHS England), is headquartered in Leeds. Its presence has complemented growth and innovation for the city’s healthcare software companies, which include firms like Radar Healthcare and EMIS Health.
In addition to companies catering to healthcare administration, the Leeds health tech ecosystem is home to startups that specialise in medical devices, like Eventum Orthopaedics, which has created a knee replacement surgery device that lets orthopaedic surgeons record the strength of a person’s quadriceps muscle.
The city’s health tech credentials aren’t limited to humans, either, with pet insurance and health app Vet-AI located in Leeds.
The UK’s second banking centre
It is with good reason that Leeds is known as the UK’s second centre for banking. According to Invest Leeds, there are more than 28,500 people employed by major banks and building societies in the city. Among them is Lloyds Banking Group, which recently unveiled plans to move to a new energy-efficient office space in the city centre.
In February, a new finance and innovation centre launched in Leeds to support the UK’s fintech industry and identify challenges that might hinder growth. The Centre for Finance, Innovation and Technology (CFIT) has been formed in response to a direct recommendation by the Kalifa Review of UK Fintech, which looked at how the country could retain its leading fintech position.
And last year, the UK’s Financial Conduct Authority (FCA) opened an office in Leeds and hired more than 100 new staff as part of a regional expansion.
It is therefore unsurprising that the city’s financial background translates into a strong fintech sector. According to a report by Whitecap Consulting, the number of fintech startups and scaleups in the Leeds City Region has increased by 263% since 2020
Among them are Answer Pay, which is using open finance to aggregate invoices into one place. There is also a focus on green fintech,with startups such as Tred, which has created a debit card that provides consumers with information about their carbon footprint as they spend.
“Leeds is a finance hotbed and it’s no surprise to see the FCA and CFIT establish a presence in the city,” says Harris. “I’m excited to see the innovations that the next generation of Leeds fintech startups develop.”
In addition to finance, Leeds’ fast-growing legal sector also makes legal tech a space to watch.
What’s powering Leeds scaleups?
Leeds is home to nine universities, which produce over 39,000 graduates annually. Some 18,000 of them study science, technology, engineering, arts and maths subjects, creating a healthy talent flow.
In fact, the Bank of England governor Andrew Bailey recently cited the flow of data science graduates as a key reason why the central bank chose Leeds for its northern hub.
Leeds also fares well for gender diversity in tech roles. According to Tech Nation, 51% of women under 35 are working in digital jobs – one of the highest proportions across the UK’s cities.
In addition to creating the next generation of local tech talent, Leeds universities produce create spinout companies born out of academic research.
According to Dealroom, the University of Leeds has created 32 spinouts. One of those is Slingshot Simulations, a data visualisation platform for businesses to create digital twins of real-world assets.
Spinouts like Slingshot Simulations are supported in the commercialisation pipeline by investment firm Northern Gritstone, which was established by the universities of Leeds, Manchester and Sheffield.
There is plenty of other support, including several creative and innovation spaces providing a base of operations for startups. They include the Nexus innovation centre and the Platform co-working space. Leeds Dock, a former casino that has been transformed into a creative workspace, has recently opened its doors and is the location for Exchange’s latest scaleup programme.
Other accelerator and incubator programmes include Accelerate at Leeds Beckett, Indielab, and Spark. Meanwhile, professional services firm KPMG has a dedicated space at the Nexus innovation centre to provide scaleup support.
In all, there are more than 70 creative, digital and tech meetups in Leeds. The largest of these is Leeds Digital Festival, which is heading into its eighth year and attracts over 40,000 attendees. All these elements link together to create a vibrant and collaborative tech ecosystem.
“I always say it’s the most collaborative tech sector in the UK,” Clarke tells UKTN. “People moving to the city can find a network and support really quickly, there are more than 70 regular tech meetups and the success of the Leeds Digital Festivals shows what can happen when people come together.”
Leeds tech challenges
As with many tech hubs across the UK, Leeds startups and scaleups are fighting for talent and funding. The latter has been brought into sharp focus as funding becomes harder to come by with rising interest rates and difficult economic headwinds.
“Every firm I know has vacancies, but we’ve seen a citywide movement over the last few years to bring in more apprentices and graduates, rather than firms competing with each for the same talent,” explains Clarke.
Data published last year for the Digital Economy Council found that Leeds retains 30% of students post-graduation, putting it in the top five cities in the UK for graduate retention.
Clarke adds: “It’s the same with funding: we may have fewer angels and VCs than, say, London, but the number of funders within the region has grown in the last year or two and more are coming into the city, attracted by the talent and – dare I say it – more reasonable valuations.”
In 2020, Leeds ranked number one in the UK Tech Town index, a list offering guidance on the best UK cities to work in tech. However, it dropped to eighth place in 2022. The Computing Technology Industry Association, which created the index, cited a rise in the cost of living and a slowdown in tech job growth.
This drop demonstrates how hard earnt and precarious it is for the UK’s tech hubs to maintain momentum. However, there are signs that Leeds is well-positioned to bounce back.
According to law firm Irwin Mitchell’s latest UK Powerhouse report, Leeds will be one of the few northern cities to improve its rate of job creation by the end of 2023, which would see it jump from ninth in the UK city employment league table to sixth.
A separate analysis, conducted in 2021 by the UK’s Digital Economy Council and Tech Nation, projected that Yorkshire’s digital industry will create 42,000 tech jobs by 2025.
“Despite challenging headwinds across the UK, the tech sector in Leeds is in a strong position to weather the storm thanks to its healthy talent flow and support ecosystem,” adds Harris.
Lloyds Bank’s relationship managers are experienced in the tech sector and are keen to support further growth of this vibrant industry. Please get in touch today to discuss how we might help your business.
Steve Harris is the UK head of technology for SME & mid corporates at Lloyds Bank.
For more information about how Lloyds Bank supports UK tech businesses, click here.
In partnership with Lloyds Bank.