By Dr Edward Jones, Researcher in the City of London Research Team
The growth of the digital industries is a much-discussed phenomenon, credited with having transformed the economic fortunes of our near neighbours in Shoreditch and Hoxton. At the metropolitan scale, the Mayor of London anticipates that ‘Information and Communication’ (ICT) is set to increase to 668,000 jobs by 2050[1]. Finance and Insurance firms remain the biggest employers in the Square Mile (discussed in our 6th October blog post[2]), but ICT is growing – potentially in response to the digital appetite of the City’s larger sectors.
Recently released Business Register and Employment Survey (BRES) data allows us to analyse the digital industries component of ICT in greater detail. Tech City UK has identified several four-digit Standard Industrial Classification (SIC) codes which justifiably cover the ‘digital tech’ sector[3]. Zooming in on these, while stripping out activities like the manufacture and repair of computer equipment, gives a fine-grained view of the performance of the ‘digital tech’ sector of the Square Mile, shown on the chart below.
The data suggests City digital firms might indeed be supporting the wider finance and insurance cluster. The City’s ‘computer consultancy activities’ sector has more than doubled to 13,500 employees from 2010 to 2016, and has widened its lead over other digital tech sectors. Computer consultancy across London has grown far less dramatically – at 42% over the same period.
Overall, Square Mile digital tech employees have increased by just over a half between 2010 and 2016, from 19,700 to 30,700. It may even be the case that digital tech activity in the City is greater than these figures suggest, for three main reasons:
Firstly, digital employees may be wrapped up in the wider SIC category of their firm. Digital and tech activities could be carried out in-house by businesses which lie outside ICT, such as financial services (FS) and insurance firms. Fintech is a growing phenomenon – PwC view digital innovations and technology-enabled change increasingly as a mainstream element of FS firms,[4] while Deloitte stress technological innovation as a major driver of change for FS[5].
Secondly, FS firms could ‘buy in’ digital tech expertise from businesses located outside the Square Mile. Recent research for us by KPMG indicates that 61% of financial institutions are partnering with innovators to develop their fintech capabilities[6]. City firms might exploit the digital business offer of the wider ecosystem, using the services of businesses registered in the rest of London, or indeed further afield.
Thirdly, firms doing digital tech work don’t necessarily categorise themselves as such. Both Spotify and Google have declared themselves part of the ‘other business support service activities not elsewhere classified’ SIC category[7]. The variety and reach of SIC codes do not necessarily capture the diversity of activities carried out by firms, and businesses might not choose to adopt the code which closely matches their overall function. Nathan and Rosso[8] have used big data to investigate ICT firms, and found the sector 42% larger than SIC-based estimates.
The chart below compares the numbers employed in the City’s digital tech with those employed in two generic support/ auxiliary categories. These ‘other’ SIC categories contain sizeable numbers of employees. It may be the case that, like Google and Spotify, some of the City’s digital tech firms form part of these less precise groupings.
The Information and Communication is a small but growing segment of the City’s economy, whose capacities to spark innovations in finance and insurance mean that its clout could be larger than SIC-based employee counts imply. The increasing use of digital skills by FS firms suggest that tech employees will continue to play a crucial role supporting, and integrating into, the wider cluster of finance and insurance businesses.
[1] https://data.london.gov.uk/dataset/long-term-labour-market-projections
[2] https://colresearch.typepad.com/colresearch/2017/10/jobs-growth-in-the-city-of-london-1.html
[3] https://www.techcityuk.com/wp-content/uploads/2016/02/Tech-Nation-2016_FINAL-ONLINE-1.pdf
[4] https://www.pwc.com/gx/en/industries/financial-services/publications/financial-services-technology-2020-and-beyond-embracing-disruption.html
[5] https://dupress.deloitte.com/dup-us-en/industry/financial-services/talent-technology-future-of-financial-services-survey.html
[6] https://home.kpmg.com/uk/en/home/insights/2017/10/value-of-fintech.html
[7] https://rss.onlinelibrary.wiley.com/hub/issue/10.1111/sign.2016.13.issue-3/
[8]https://eprints.lse.ac.uk/65211/1/Max_Mapping%20digital%20businesses%20with%20Big%20Data.pdf