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London Technology Week 2016 – Bigger, but is it bubbling?

20/06/16
London Technology Week 2016 – Bigger, but is it bubbling?
The third London Tech Week (20-26 June 2016) is bigger than ever

Almost 300 live tech events are planned for the Mayor of London’s annual flagship promotion for the sector.  And the sector itself has never been more important for the UK economy – last year EY estimated that tech in the wider sense is worth £18b annually and employs 200,000.  So far the sector has done an excellent job at promoting its own success story. 

But behind the scenes some analysts fret that economic bubbles may be forming.  Certainly tech firms are notoriously difficult to value.  Most of the 17 tech “unicorns” in the UK (those worth over US$1b) do not have the tangible assets on their books that other companies of their size might have.  There is some anecdotal evidence that some companies are being priced out of London’s Silicon Roundabout tech neighbourhood.  In such an environment, selling the success story will become more challenging.

Investors would be wise to watch out for overvaluations, particularly in the growing and excitable tech scene.  However here are some reasons why the long-term prospects for tech should remain positive – and why with the right communications strategy, good digital firms can protect themselves from bad apples in the sector.

First, the technological advancements underlying the sector are strong.  Many areas of tech innovation, such as big data analytics, Internet of Things, and fintech, are only just starting to link up with each other.  Fields such as edtech and medtech are still learning to apply their ideas to the mainstream traditional work being done in schools, hospitals and laboratories.  It seems unlikely that the pace of innovation in these fields will slow.  Individual projects may go sour but the overall trajectory of innovation should remain strong.

Second, the factors that make the UK a fertile ground for tech should remain positive.  There is an excellent skills base including the capacity to import new skills quickly, a conducive regulatory environment and a government committed to prioritising the sector, and the financial capital to keep funding new ideas.  Barring a shock such as Brexit, the UK environment should continue to be the most conducive to the tech sector.  The UK Government has done a good job so far in telling this story to the world.  Those communications efforts will become even more important in the event of a shock to the economy.

Third, while London may have high prices and a housing shortage, other parts of the UK stand ready to hoover up any displacement.  Bristol and Brighton already have thriving tech sectors.  Edinburgh offers many of the same skills, financial institutions and an innovative start-up culture that London has, at a fraction of the cost.  And England’s northern cities are ready for tech – as the work of Tech North demonstrates. Northern cities and businesses must continue to counter outdated perceptions and to explain that the North truly is open for digital business
Be cautious of individual bubble investments.  But remember that bubbles often presage longer-term growth - from the tulip bubble of 1637 which preceded the rise of European middle class consumer spending, to the DotCom bubble of 2000 which came before today’s Internet behemoths.  Investors should keep calm and carry on believing in UK technology.  Being able to explain the underlying strength of your tech product or service through a solid communications strategy will definitely help.

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