Is the UK moving towards a less centralised Germanic-style tech industry?

Stephen Georgiadis
Stephen Georgiadis, Managing Director at investment bank Altium

The European technology industry continues to evolve rapidly as we move into 2015. On a recent trip to Hanover, David Cameron suggested that the UK and Germany are leading the next digital revolution in Europe. Both countries are affected by similar technology sector trends, so what are the key themes here?

Industry 4.0

One current hot topic is the Internet of Things (IoT) or, as it is known in Germany, Industry 4.0. The interconnection of computing devices via both mobile and internet infrastructure offers technology companies a whole new set of opportunities.

Over the next few years, interconnected technology will continue to find its way into every aspect of life, with examples such as mobile phones being used to control your central heating, cars reporting on the performance of drivers to their insurance company, fridges telling their owners to pick up more milk and specialised sensors monitoring elderly people within their homes. There are many intriguing possibilities; the trick will be guessing which ones hold the potential to build valuable and sustainable business models.

The move to cloud computing is also accelerating, albeit at slightly different rates, with Germany, for once, being a bit behind the UK in this regard.

Tech capitals?

Unsurprisingly, there are few differences between the UK and Germany when it comes to major tech trends. However, how do the two compare in terms of where these major tech developments are happening? Is the tech industry centred on the capitals of London and Berlin, or are we seeing other regions stepping into the limelight?

In the UK, it's certainly true that London's tech scene has skyrocketed since 2010. An estimated 200 tech startups were based in London in 2010. Now in 2014, there are over 3,000 fledgling tech groups, with nearly 20 London-based companies being listed on the London Stock Exchange, and in the past quarter, $1 billion (around £630 million, AU$1.2 billion) has made its way into various tech-based venture funds.

This growth is being driven partially by increased government support, with the UK government investing £50 million (around $79 million, AU$95 million) in Tech City (also known as Silicon Roundabout), which has also attracted large US companies including Amazon, Google and Twitter. London clearly is a tech hotspot – however, are there any other areas of the UK that are attracting tech-based entrepreneurs?

Mancunian enterprise

Manchester's certainly up there. The city that invented the first stored-program computer is home to over 6,000 technology-related companies, employing more than 100,000 staff. With the largest student population in Europe, Manchester benefits from a pool of labour and is fast becoming one of the hotspots for tech startups.

Typical examples include App55, a digital payments solution, and online ticketing firm Fatsoma, both of whom have seen strong growth figures in their early stages. Manchester benefits from cheaper rent, access to plentiful power, and international links via the airport, all of which create a nurturing environment for tech startups.

This trend has developed over recent years, with EON Reality co-founder, Dan Lejerskar, dubbing Manchester the perfect location for the UK's digital city in 2012. With the recent establishment and growth of MediaCityUK, it's clear that Manchester is also rapidly becoming a major media hub in the UK.

So the UK has a tech and media focus around its two biggest cities, London and Manchester; but how does Germany compare?

Looking to Germany

Berlin, which has a thriving tech scene, has also joined the silicon family, nicknamed 'Silicon Allee'. A recent study by consultancy firm McKinsey estimates that Berlin tech-startups could generate as many as 100,000 jobs by 2020, which is vital for a city with the highest unemployment rate in the country.

With companies such as Google, Mozilla and Microsoft moving into Berlin, the city has proved its attraction to tech companies of varying sizes. Another example is Rocket Internet, the incubator of fast growth companies, which has recently floated with much fanfare, and at a huge price. This shows that Germany aspires to bring world dominating technology to market in the same way as Silicon Valley and the venture funds of the San Francisco Bay.