The South West tech sector is set to grow to almost £20bn gross value added (GVA) a year by 2026, creating over 125,000 new jobs, according to a new study from Whitecap Consulting.

The research, commissioned by Tech South West, reveals that the South West is rapidly becoming a global leader in environmental tech, with the West of England home to the largest tech sector in the South West – something which will come as no surprise to the community here. The tech sector in the West of England is now home to 4,894 companies and a 629,900-strong workforce, generating £3,048m GVA in 2021.

The report showcases the internationally recognised tech firms, centres of excellence, science parks, university research and innovation hubs operating in our region with specialisms including environmental science, marinetech, climate science and cleantech, along with fintech, deep tech and robotics.

Becoming a global leader

The South West has the fifth largest tech sector of the 12 major regions in the UK, worth £11bn GVA annually, and is now generating around one in 11 (7.9%) of all new tech startups in the country. With nearly 170,000 people working in the sector, the GVA per capita of £1,943 is the second highest in the UK when compared to all other regions outside London and the South East, the study reveals.

The research found that if growth rates continue in line with the past five years, even factoring in the economic disruption caused by the pandemic, the South West’s tech sector will be worth £19.2bn by 2026. Tech job creation in the region is forecast at 75%, rising from 168,169 in 2021 to 294,380 by 2026, an additional 126,212.

The West of England has the biggest tech sector of any South West sub-region, with 45% more tech activity than the next largest sub-region of Gloucestershire, according to the report. The city of Bristol alone accounts for 13% of the South West’s tech GVA, standing as the third largest UK city for tech investment and home to the 4th largest regional cluster of high-growth companies outside of London.

The most common tech sector in Bristol is Software-as-a-Service (SaaS), the report reveals, but it has key strengths in many other sub-sectors of tech. This gives the city a rich tech base that is often highlighted nationally as a hub for ‘Tech4Good’, based on the prominence of organisations aiming to have a positive societal impact. Companies like Graphcore, Xmos, and Blu Wireless are based in Bristol, giving the city a strong presence in the semiconductor space. Many CleanTech start-ups like LettUs Grow and G-volution have also chosen Bristol as their home.

The strength of the area for financial technology, or FinTech, is explored in the report, including the West of England’s female FinTech founder rate which at 14% is higher than any region outside of London. However, with a growth rate of just 9% – the lowest in the region – talent remains a key issue facing the sub-region and graduate retention should be a key focus of the sector.

The South West now accounts for the largest proportion of the UK’s tech lending outside London and the South East, with Bristol the primary hub for investment secured. Tech South West has launched the Funding Advisory Board to help develop the funding ecosystem and opportunities across the region.

Dan Pritchard, co-founder of Tech South West, says, “The South West of England’s tech sector is on an upward curve. Not only is this fantastic for the economy and jobs, it’s evidence of the role the region plays globally in tackling climate change. With international tech specialisms including climate and environmental science, marine tech, cleantech and agritech, the South West is fast becoming the UK’s natural green powerhouse of tech. It is substantial growth and a huge number of vacancies, which will require a combination of improved productivity and efficiencies, talent, and automation to help us get there.”

The report, includes findings on startups, scaleups, research, innovation, investment and funding, and talent across what is the largest of the English regions, covering Bath, Bournemouth, Bristol, Cornwall, Devon, Dorset, Exeter, Gloucestershire, Plymouth, Somerset and Wiltshire. Astley Media, Censornet, CoreBlue, Deloitte, NatWest and the University of Exeter are partners of the project.

Dave Tansley, UK vice chair at Deloitte, tells us, “Innovation is an essential element of business strategy, with technology a key enabler. The exponential growth expected is therefore good news for businesses across the region. It’s a very exciting time to be involved in this sector, but along with the financial benefits of growth to the region come some challenges as the report points out. How do we create, attract and retain talent? Collaboration – getting the region working together, not in competition, and funding – how does the South West get its share? This report is just the start of a region-wide collaboration to make this tech sector growth opportunity a reality.”

Key facilities and research centres flourish including universities and science parks in Bristol, Exeter, Falmouth and Plymouth, the National Composites Centre, Quantum Technologies Enterprise and Innovation Centres, Met Office, Spaceport Cornwall and Plymouth Marine Laboratory.

There are challenges, particularly around talent. The region has 14 universities and nearly 170,000 students, including 19,500 tech and engineering students (11% of all students, compared to 7% UK average), but has a high vacancy rate across the tech sector, with recruitment difficulties and salary inflation. Whilst still low, the report does reveal that the sector has double the proportion of black and minority ethnic employees (8.8%) compared to the region’s overall ethnic minority population.

Chris Evans, director of Innovation, Impact and Business at the University of Exeter, comments, “This research is perfectly timed and emphasises that as a region we have an opportunity to achieve something really significant. We must work together to target resources such as Levelling Up and the Shared Prosperity Fund to make sure our innovative R&D can help drive the sectors with a real competitive advantage.”

Toby Parkins, chair of Tech South West and co-founder of Cornwall-based software firm Headforwards, adds, “The tech sector is creating growth at rates exceeding all other sectors. This report clearly demonstrates that the whole tech sector needs to be embraced to create significant economic growth.

“Now we need local and national Government to step up and collaborate, developing more effective policies and creating the high growth conditions for businesses.”

Whilst the new £200m South West investment fund announced by the Government is seen as a major opportunity, there is recognition that the region still does not attract sufficient funding and investment from national bodies such as Innovate UK and investment funds

Louis Spencer, NatWest Commercial Banking, South West, says, “We are delighted to support this landmark report showcasing the depth of the region’s technology and digital ecosystem. The South West is home to a burgeoning tech economy with leading clusters in Cyber, GreenTech, DeepTech and FinTech. This report provides a strong platform to share unique insight to stakeholders or founders looking to start, invest or grow a tech business in the region. Natwest is delighted to be playing its part to help the sector thrive.”

Tech South West works across the region to help tech companies thrive, through business support, talent and funding programmes and activity, commissioning research, running the prestigious annual Tech South West Awards, the South West Esports Festival and other events.

Shona Wright

Shona covers all things editorial at TechSPARK. She publishes news articles, interviews and features about our fantastic tech and digital ecosystem, working with startups and scaleups to spread the word about the cool things they're up to. She also oversees TechSPARK's social media, sharing the latest updates on everything from investment news to green tech meetups and inspirational stories.