Are UK tech scaleups facing a skills gap?

Technology companies are growing in importance to the UK economy, but helping turn small, start-up companies into fast-growing scaleups that can stay the course is a challenge. One of the major potential brakes on growth is the dearth in availability of advanced digital and technology skills that many companies need. So are tech scale-ups facing a skills gap as the demand for AI, cloud, data, software development and robotics skills is soaring and how can a company’s M&A strategy help?

The UK is now home to more tech unicorns than the rest of Europe combined and the Government is committed to boosting innovation and driving ‘levelling up’ across the country, so what is the state of play of the UK tech jobs market?

Tech Nation’s Job and Skills Report 2021 shows that the tech labour market in the UK has rebounded from the two-year turbulence created by the Covid-19 pandemic. Its research confirms that demand for tech jobs was 42% higher in June 2021 than at the same time in 2019, demonstrating the resilience and importance of tech to the vitality of the UK economy.

Tech Nation also outlines how more than $18bn of Venture Capital (VC) investment was committed to innovative tech firms in the first six months of 2021, helping stimulate economic growth and job opportunities across the UK. 

Now, nearly three million people work in the UK’s digital tech economy, around 10% of the total working population. The report’s figures show that tech jobs are also relatively well-paid. The average tech salary is up to 50% higher than the average for all vacancies in the UK, and is increasing. Front End Developers and Data Scientists have seen the highest increase in salary over the three years 2018 - 2020, with a respective 34% and 31% rise.

As tech becomes an ever more pervasive part of our modern economy - nearly one-third of all retail sales now take place online - over 36% of jobs in the digital tech economy are in non-tech specific occupations, like HR, Legal, Finance, Sales and Marketing. All these roles are essential to helping support and drive the performance of growing tech firms, and give opportunities for people to succeed in the wider tech economy.

The stats show that the market for tech and digital skills in the UK is buoyant, but what about the future supply of tech talent?

One factor to consider is the pipeline of digital talent coming through. Do the UK’s young people consider a career in tech desirable?

According to The Learning & Work Institute, the UK is heading towards a "catastrophic" digital skills shortage. LWI says the number of young people taking IT subjects at GCSE, the exams normally taken at the age of 16, has dropped by 40% since 2015. An incredible statistic seemingly at odds with how young people rely on and enjoy using technology.

Dr Neil Bentley-Gockmann, chief executive officer, WorldSkills UK, which aims to raise standards in apprenticeships and technical education, commissioned the research which revealed other surprises that could have real economic consequences for tech scale-ups.

Fewer than half of British employers believe young people are leaving full-time education with sufficient advanced digital skills, while 76% of firms think a lack of access to talent with digital skills is likely to hit their profitability.

Meanwhile, 70% of young people surveyed expect employers to invest in teaching them digital skills on the job, but only half of the employers are able to provide that type of training.

Bentley-Gockman says that contributing factors include poor career advice, with a lack of real understanding and guidance about potential career paths, plus the difficulty of making many technical professions seem appealing to a wide range of young people, especially young women.

As the rate of technology change accelerates, mid to large scale companies can struggle with innovating quickly and effectively with their existing in-house teams. Established teams are normally fully committed to existing projects and to the agreed technology roadmap with no extra bandwidth.

That’s where the “acquihire,” or strategic purchase of a smaller company, not only for its technology, but also for its talented team comes into play.

One of the world’s most successful companies often uses the acquihire technique, but doesn’t always shout about it. In February, Apple CEO Tim Cook told shareholders that the company had bought about 100 companies over the past six years (source: CNBC).

Apple picked up multiple firms in sectors such as augmented and virtual reality, artificial intelligence, healthtech, and semiconductors, quickly integrating their tech and engineering teams into the Apple structure and giving its followers clues about its future focus and direction.

“During any M&A process we run, our assessment of the quality of the leadership team and technology talent is absolutely crucial to the ultimate valuation of the deal,” says Miro Parizek, founding partner, Hampleton Partners, the international M&A and corporate finance advisory firm for technology companies.

“What’s more, it’s essential to ensure that key members of those leadership and technology teams are locked-in to the deal to ensure the company valuation is maintained post-acquisition for the integrated company to have the best chance of being successful.”

Technology is at the heart of the changes that many of us are experiencing in our working lives and tech scaleups need to use a range of techniques to attract, retain and upskill existing tech talent. 

Reskilling can be a great alternative to making team members redundant if their skills are out of date. A recent LinkedIn Workplace Learning Report, showed that 51% of companies are planning upskilling programs and 47% reskilling programs. There has been a rapid increase in availability of online education and courses to complement in-house, on the job training. Companies need to integrate these into their development programmes.

Companies are also going to have to ensure that they can attract freelance and gig economy tech workers. Being able to work remotely and balance family and other commitments are important to many tech workers and, with competition for their skills at an all-time high, scaleups need to provide attractive hybrid and remote working opportunities, with flexible and portable benefits on offer, as well as good rates of pay.

There is no doubt that the UK tech sector is currently booming, but much more needs to be done, on a governmental as well as company level to ensure the tech talent pipeline keeps flowing.

To keep up-to-date with the latest technology trends, plus merger and acquisitions activity, subscribe to https://www.hampletonpartners.com/reports/ for free access to 12 Hampleton Partners’ M&A Market Reports every year. 

Read other parts of this series: 

Part 1: Why tech scaleups are key to turbocharging the UK economy

Part 2: Five UK tech scaleups most likely to succeed

Part 3: Are UK scaleups facing a skills gap?

Part 4: Five mistakes to avoid when selling your tech scaleup

Part 5: Thinking about selling your tech scaleup? Here's our countdown to a sale