Digital marketing growth blocked ‘by talent shortage’ (UK case study)

May 22, 2013 | Digital marketing skills

With London’s buoyant tech sector set to enjoy the annual Shoreditch Digital festival that starts today, a new report has highlighted the impact that a shortage of skilled workers and a lack of funding is having on its growth. The ‘Tech City Futures’ Report – produced by GfK, one of the world’s leading research companies […]

With London’s buoyant tech sector set to enjoy the annual Shoreditch Digital festival that starts today, a new report has highlighted the impact that a shortage of skilled workers and a lack of funding is having on its growth.


The ‘Tech City Futures’ Report – produced by GfK, one of the world’s leading research companies – surveyed London’s businesses based out of Tech City.
Among its key findings:
• Nearly a half (44%) find a shortage of skilled workers is the biggest challenge they face
• Over three quarters (77%) say a lack of skilled workers is restricting their growth
• A third (33%) believe a lack of access to capital is hindering their business. A similar number (29%) say as a consequence their company is missing significant business opportunities to expand
• There are mixed feelings about the effectiveness of Government support. While some initiatives have gained widespread support, others have been criticised for an emphasis on what some perceive as PR as opposed to helping develop Tech City’s infrastructure.
“This report highlights the ecosystem of entrepreneurship and how vitally important it is to have all the elements in place,” said Ryan Garner, Research Director for GfK.
“It’s about business leaders with vision and skilled employees to create and bring products and services to market, and investors willing to take risks. 8.3% of Britain’s GDP comes from tech, and that is expected to rise to 12% by 2016. Our research shows Tech City is at a tipping point, and hopefully this report will help it find its way in spearheading that economic growth.”
Finding and retaining the right talent impacts almost all Tech City firms
The majority of Tech City businesses have vacancies they can’t fill. The top five skills most in demand are: coders & developers, marketing & PR, business development, web design and user experience specialists. Coders & developers, followed by user experience specialists and research & development are the most difficult roles to recruit (Chart 1).
However, it’s not just recruitment but staff retention that is also a challenge. Tech City firms have recruited six people on average over the past year, but further growth is hindered because much of that activity has been to replace talent previously lost, rather than to create new jobs to support business expansion. 42% of Tech City businesses find it somewhat, or very difficult, to retain their best talent.
Chart 1: Talent
gfk1.jpg
This skills gap is being plugged by temporary resources, including freelancers and interns. Almost all (94%) of the business leaders interviewed say they use temporary staff in their business – but only 17% prefer to do so.
Accessing capital is holding back a third of Tech City businesses
A third of Tech City business leaders say their business is hindered by a lack of capital, whether sourced from investors or banks. The result is that almost one third (29%) believe their company is missing significant business opportunities to expand. 19% say they are making people redundant.
Tech City firms use on average 3.4 sources of finance with angel investors, venture capital and borrowing against personal assets being the most popular (see Chart 2 below). As these businesses grow, they need further injections of capital to support marketing and business development efforts, technology development and international expansion. GfK’s research shows that of the 43% of firms that have raised further capital, almost a quarter (23%) had problems, from the length of time it took, to investors/banks unwilling to take a risk, to a straight refusal for funds.
Steve Leith, who heads up Grant Thornton’s early stage technology team in Tech City, said: “Many of the startups around Tech City may be early stage, but they are tackling complex funding requirements to fuel rapid expansion. Whilst there is an increasing flow of angel capital, we see a growing gap for businesses requiring investment of £500,000 to £2 million. This is in stark contrast to the development of the funding community in the US where the cycle of tech entrepreneurs reinvesting in startups is fully developed and the VC community has a greater appetite for risk. UK Government supported initiatives such as the MMC London Fund and GrowthAccelerator may prove part of the solution, but more will be needed to fulfil Tech City’s potential, and avoid a loss of talent and investment opportunities to the Silicon Valley dollar.”
From Silicon Roundabout to the global technology sector
Tech City’s business leaders have mixed feelings about the effectiveness of the UK Government’s support so far. Whilst there are positive feelings about the area for encouraging young businesses, gaining support from Google and other large technology firms, and London’s tech sector overall, others feel there has been more PR than action from Government. This ‘hype’ is seen as negative – pushing up rents and salaries, and attracting global firms that have poached the best talent.
Chart 2: Finance
gfk2.jpg
TechCityInsider.net’s Editor Julian Blake said: “The key message in the report is that there aren’t enough skilled developers out there to meet demand. This means startups are turning to temps, interns and recruitment from overseas as they lose out to the City and the US in what amounts to a new tech brain drain. We’re also hearing very mixed messages about the role of Government. While many applaud the Tech City initiative for promoting the area and attracting big US corporates like Google, others are sceptical, believing that the Government is trying to take the credit for an economic success story that was happening anyway.”
Sources:
www.techcityuk.com/
www.gfk.com/uk
www.grant-thornton.co.uk
http://digitalshoreditch.com

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