City’s economy at the front line of a digital revolution

Once the heavy engineering workshop of the British Empire, Glasgow is now the digital technology heart of Scotland, with plans to turbo-charge the sector even further

By James taggart

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Glasgow, Scotland’s largest city, has a dynamic and growing digital economy that attracts foreign and UK investment in business process outsourcing, financial services technology (fintech), e-commerce, social networking and enterprise software.

Genpact (NYSE: G) the US global professional services firm is a case in point. It plans to nearly triple its workforce of around 165 in Glasgow within five years. This expansion of its European operations will encompass digital solutions, risk management, insurance claims, business process transformation, and customer service.

Genpact is part of a thriving ecosystem, as shown by analysis in the annual Tech Nation 2017 report on the UK’s digital economy. Glasgow’s digital technology sector employs nearly 26,000 people, with an average advertised salary of around $60,350.

Of those surveyed, 88% liked the quality of life, and with an average office rental of $25 to $30 per square foot, and an average house price of $206,980, it is a cost competitive location for companies and employees alike.

Tech Nation 2017 estimates that the sector contributed nearly $748.21m gross value added to Glasgow’s economy between 2011-15 as the number of businesses involved, and their collective turnover, rose by a third. There were 331 start-ups, and 19% of the sector’s stock of companies are classified as high-growth.

Notable foreign IT enterprises located in Glasgow include defense and aerospace contractor Lockheed Martin (NYSE: LMT); IT firm HP (NYSE: HPE); and Japanese multinational consultants, IT and business process outsourcing specialist Everis Group.

Other presences illustrating the diverse range include US-owned Brightree, provider of cloud-based software to the health sector; IT infrastructure firm Softcat; e-commerce web developer Indez; and Systal Technology Solutions, which delivers advanced networking services across the UK, Europe and Middle East.

In fintech, significant work forces are employed by the technology operations of established players such as JP Morgan Chase & Co (NYSE: JPM); Morgan Stanley (NYSE: MS); US multinational SAS’s big data R&D center for combatting fraud and financial crime; and international bank Barclays (LON: BARC).

Fintech start-ups include Castlight Financial, which develops products providing real-time affordability and financial capability analysis. Other representatives of the sector include US-owned Cloudwick Technologies, a leading provider of enterprise business and technology modernization services and solutions to Global 1000 companies; Australia’s Encompass Corporation, developer of know-your-customer software; and ECS, a fast growing UK IT infrastructure consultancy and security services. All have settled in Scotland with support from Glasgow City Council (GCC) and state development agency Scottish Enterprise. Genpact’s latest investment is supported by a $3.87m grant from Scottish Enterprise, for example.

Space technology is also gaining traction from a Glasgow base, as evidenced by Alba Orbital, Clyde Space, and US-owned Spire.

The council’s economic strategy for 2016-2023 identifies digital technology, and finance and business services, among priority sectors for early action to support further jobs growth.

Frank McAveety, leader of Glasgow City Council, says the city has the most jobs and economic output from the digital and tech sector in Scotland
Frank McAveety, leader of Glasgow City Council, says the city has the most jobs and economic output from the digital and tech sector in Scotland

“We have the fastest growing city economy in the UK and expect it to grow by a further 7.2% by 2020,” says Councillor Frank McAveety, leader of Glasgow City Council. “We also have the highest number of jobs and economic output from the digital and tech industry in Scotland. We aim to increase the number of people with digital skills, grow our business base, and more effectively market our digital success.”

Recent, planned, and proposed infrastructure developments will help this ambition. GCC is working with other stakeholders towards establishing the first two Innovation Districts in Scotland. “Building on existing key assets, we see an opportunity to develop expansion space for private sector companies in key industries,” McAveety said. “Discussions have taken place between the council, the University of Strathclyde and Scottish Enterprise about the need for enabling infrastructure for the first Innovation District – such as new office space, fiber networks, and public realm improvements.”

This Innovation District, aimed at growing the life sciences and engineering sectors, will be co-located at the University of Strathclyde’s Technology & Innovation Centre, Scottish Enterprise’s Innovation Building, and The Tontine building. The Tontine is a business incubation center that will support and sustain development of high-growth companies involved in enabling technologies, advanced design and manufacturing, and creative economy sectors.

The University of Glasgow has plans for the second Innovation District to embrace its campus and link with the new Queen Elizabeth University Hospital, which is the largest acute care hospital in Western Europe.

QEUH hosts the University of Glasgow’s new $40m Imaging Centre of Excellence. This includes Scotland’s first ultra-high resolution magnetic resonance imaging scanner. Linked space for industry puts companies in close contact with world-leading research and clinical expertise in stroke, cardiovascular disease and brain imaging, and has already attracted an overseas business.

There are good road, rail and air connections with other UK cities and foreign destinations. Work is progressing to connect the city center to an existing ultra-fast pure fiber network; up to 15,000 businesses will benefit when the city-wide roll-out is completed. The city center boasts free wifi.

Beyond financial incentives and physical infrastructure, investors stress that access to IT skills is a major reason for locating in Glasgow.

“The Glasgow metro area has provided an exceptional talent base and favorable economic climate, especially for our financial services business,” says Mohit Thukral, senior vice president and business leader – banking, financial services and insurance – for Genpact.
Nearly four fifths (77%) of the city population of 606,000 is of working age (16-64), representing a labor pool of more than 400,000.83% of residents work in the city, which is at the heart of a metropolitan area with a regional population of 1.8m, a third of Scotland’s population.

Glasgow’s three universities and three super colleges deliver qualified graduates prepared for careers in IT. Strathclyde Business School how has a Masters in Financial Technology, for example. The University of Strathclyde alone has spun out more than 50 companies with total annual sales of $99.75m.

The universities teach nearly 15,000 students business administration, computing science and languages, with over 5,000 graduates each year. At just over 46% (2014), graduate retention in Glasgow is the highest in Scotland, making it easier to recruit home-grown talent.

Others keeping the skills pipeline topped up include CodeClan, Scotland’s digital skills academy. Leading IT graduate employer FDM Group’s major development center in Glasgow provides more than 100 seats in its training academy to skill graduates for bespoke requirements.

Councillor McAveety says: “We have a strong story to tell on the skills side. Our economic strategy stresses that we will increase the number of young people gaining qualifications in IT, support the establishment of more digital skills academies, and provide more support for coding in primary schools.”

For more information, contact: Anne Murray, Inward Investment Manager: anne.murray@drs.glasgow.gov.uk