A report from Deloitte estimates the London technology, media and telecoms (TMT) sector generates an overall economic contribution of around £125 billion a year to London and the rest of the UK. This accounts for 8 percent of UK GDP (gross domestic product).
To ensure London remains a global TMT hub, said Deloitte, the government and financial services industry "need to support the technology sector with adequate funding to develop companies that can be globally successful".
The sector also needs to "drive collaboration between businesses, universities and other institutions", and "nurture talent that combines creative and tech skills", to successfully innovate in the digital economy.
The Deloitte report, ‘London Enabling a World Leading Digital Hub’, has been published with backing from EMC, Intel and London First. The report says the £26 billion of direct economic impact (gross value added) generated from the London TMT sector, leads to an additional £23 billion of economic impact for London.
London TMT activity also leads to £77 billion of economic impact for the rest of the UK, through the London TMT sector’s purchases and employee spending, as well as "through the enablement of other sectors within the economy", says the report.
The report says one in ten jobs in London are in the TMT sector, and that over a quarter (28 percent) of total TMT employment in the UK is in Greater London.
The report highlights how the UK financial sector could do more to support the technology sector. It compares UK technology venture capital investment with the US. The estimated value of technology venture capital investment in the UK is one tenth of that in Silicon Valley, taking into account the relative sizes of the UK and US economies.
Organisations interviewed for the report indicated there is a funding gap for UK technology businesses at the “growth stage" of between £500,000 and £4 million, following the seed and start-up funding stages.
The report calls for the funding gap to be filled and for the financial community and entrepreneurs to step up to invest in and develop these companies.
In addition "the financial services industry should explore options to sharpen the skills to appraise investment opportunities in technology companies", perhaps by building on examples such as the Silicon Valley bank.
Jolyon Barker, global lead for Deloitte's Technology, Media and Telecommunications (TMT) industry, said: “We need our financial sector to support the technology sector in developing global players.
“As London's Tech City attracts inward investment and promotes exports, the wider UK business community should pursue a common objective to lead globally in digital creative product development across media, online games and apps, advertising and platforms, with London as the engine."
Critics of Tech City, however, claim the area in east London is getting too much government attention, and that technology investment should be spread more evenly to other parts of the country outside London. There are other well established technology start-up clusters in areas such as Manchester, Leeds, Cambridgeshire, Suffolk and parts of Scotland, for instance.