Regional spotlight: The rise of North East tech – and its growth potential

North East Image credit: Milosz Maslanka via Shutterstock

The North East of England is known for the natural beauty of its coastline, historical sites such as Durham Cathedral and Hadrian’s Wall, along with lively nightlife in cities like Newcastle. The region is also carving out a reputation as a fast-growing and vibrant hub for technology businesses in the UK.

Data collected by credit report agency CreditSafe found that entrepreneurs launched more than 12,000 startups across the region last year. The region’s key tech hotspots include Newcastle, Middlesbrough, Durham, Sunderland and Northumberland.

Newcastle is one of the North East’s most prominent tech hubs, with startups based in the city securing £86m in venture capital funding and the sector employing more than 1,300 people, according to 2021 government figures.

Data from Tech Nation from the same period revealed that in Newcastle alone, tech firms brought in a combined turnover of £2bn across around 3,500 businesses.

“The North East of England is quickly becoming a hub for tech business success, thanks to its highly-skilled tech talent pool and world-class incubators and accelerators,” says Steve Norman, commercial director at digital transformation company Tieva. “With its top-tier research institutions, the region is leading the way in driving innovation and helping tech startups get off the ground.”

Here are some of the key strengths powering growth in the North East tech sector, and the challenges that it faces.

University excellence

Access to skilled workers will always be essential to growing a region’s tech economy. The North East has that in abundance thanks to the multiple distinguished universities located within the region. Respected institutions like Durham University and Newcastle University ensure that thousands of young people learn vital skills for the digital economy – and many of them stick around to provide a healthy talent pool for local companies.

The region has one of the highest proportions of STEM students in the country, with more than 67,000 people studying science, technology, engineering, and maths.

The multitude of skilled students and graduates in the area has meant that tech firms have access to some of the country’s brightest and best to employ.

It also fosters collaboration between academia and business to create new spinouts at research-intensive universities, such as bioetch company CellulaREvolution, which span out of Newcastle University.

“The North East of England has a thriving tech ecosystem in its own right,” says Clare Loveridge, VP and general manager EMEA at Arctic Wolf, a US cybersecurity company with a presence in Newcastle. “There are world-leading universities, and whereas in the past local talent would have to move down to London for a job, many are now wanting to stay local. This makes it a great place to hire highly skilled workers.”

Despite this, there is still some concern over the recruitment of these skilled workers. “There are, of course, some drawbacks along the way that must be considered,” said Adam Burgess, senior manager at Sellick Partnership.

“The shift to hybrid and remote working has resulted in our local talent looking elsewhere for employment. This means that North East employers are constantly having to compete against the higher salaries offered in different parts of the UK.”

Immersive tech

The North East has won plaudits for its immersive tech cluster, including recognition from the Department for International Trade as being “internationally significant”. Immersive tech includes everything from virtual and augmented reality to simulations.

Facebook owner Meta’s heavy investments into creating the metaverse, a virtual world accessed by VR or AR headsets, has created excitement about the potential of the technology. The North East, thanks to a strong track record for creating gaming and creative studios, may find itself in a prime position to take advantage of the buzz around immersive technology.

“The North East is punching above its weight when it comes to immersive technology, a strong sub-sector of the ecosystem which is brimming with opportunity right now,” said Ashmita Randhawa, head of innovation at Digital Catapult North East Tees Valley.

Among the largest players in the immersive gaming industry in the North East is Coatsink, a Sunderland-based video game developer valued by Dealroom at $30m.
Other key players in the sector include the Gateshead-based video game developer Eutechnyx and the Newcastle-based esports company Hitmarker.

Fintech, cybersecurity and medtech are other strong sub-sectors across the North East. The North East’s strong manufacturing roots have also given it a solid foundation for industry 4.0 technologies, such as TeesAMP, a 34-acre site in Middlesbrough for advanced manufacturing companies.

Startups and tech titans

The North East isn’t just home to exciting young startups and scaleups like Newcastle-based SoPost and Kani Payments. Sage Group, a British multinational enterprise software company, is based in North Tyneside and is not only a tech titan of the North East but a giant on the global stage competing with the likes of Salesforce and SAP.

Founded in 1981, it has a public valuation of £7.7bn and is one of the UK’s largest and most successful technology companies.

The North East is also home to tech companies that are on the cusp of going public. Atom Bank, a challenger bank that rode the wave of British fintech growth during the past decade, is based in Durham and has raised more than £570m in funding, with a UK public listing in the pipeline for later this year.

Tech firms based in Atom Bank’s home city can benefit from a number of support networks and organisations, including the Durham City Incubator, a fully-funded accelerator programme for Durham-based business owners and entrepreneurs; and NETPark – the North East Technology Park at Sedgefield, County Durham – which is one of the fastest growing science parks in the UK.

Sunderland, which ranks among the UK’s top smart cities, is home to a 5G and IoT accelerator programme launched by Sunderland City Council and BAI Communications in October 2022, helping to support the next generation of connectivity startups.

Other support networks and organisations nurturing tech companies and careers across the North East include Digital Catapult and Sunderland Software City.

North East tech challenges

The North East has significantly lower business overheads compared to London. Meanwhile, workers frequently cite a better work-life balance compared to London and other parts of the UK.

It comes as no surprise that North East funding is significantly outpaced by London for tech investment. But the North East also trails behind the North West of England for tech funding levels.

According to data from Tech Nation, startups based in the North East received $283m in venture capital funding in 2021, up by 66% on the year prior. Meanwhile, those based in the North West raised $975m over the same period.

Beyond funding opportunities, some feel that the North East can benefit from a more unified approach. According to Adam Jacobs, founder of Bloom Procurement Services, the “challenge lies in the way the North East is positioned outside of the region itself”.

He adds: “I don’t believe it’s yet known widely as a tech hub, but there’s no reason why it can’t be.” 

One way to overcome the challenge, says Jacobs, is creating a “more cohesive strategy from leaders that represent the North East to effectively communicate what the region has to offer to the tech ecosystem”.

Bringing stakeholders together to speak with “one voice” will help the North East build on the momentum it has already generated.

The recently agreed North East devolution deal, which is yet to be ratified, would unlock notable funds and transfer significant powers to the North East under a new combined authority led by an elected metro mayor. Some see this as the next step to turbocharge the North East tech sector.

“The North East of England has long been a hub of technological innovation, but in recent years, it has struggled to remain competitive in the global tech market,” adds Tieva’s Norman. “Key challenges include a lack of venture capital investment, a need for a unified tech ecosystem, and a skills shortage when it comes to tech talent. With the right investments and initiatives, the region can remain competitive and ensure its future success.”

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.

[email protected]

For more information about how Lloyds Bank supports UK tech businesses, click here.

In partnership with Lloyds Bank.