Inside the offices that nestle within the old warehouse buildings of Liverpool’s Baltic Triangle, which house many of the city’s nascent digital technology companies, there’s a sense of purpose and industry.
Liverpool is classed as having a tech cluster, which means, according to a report out this Thursday, its digital industries stand a good chance of growing faster and generating higher salaries than in much of the rest of the country.
The pair are talking in a small meeting room about the 14 or so private shareholders who have backed his company. Many of them are high net worth individuals based locally and a well-known figure from the football industry is advising on future finance.
Ripstone, which seeks £2m for further growth, is located in the heart of the Triangle, a development area overlooking the river Mersey with a skyline on one side dominated by the city’s imposing Anglican cathedral.
Liverpool has a history of video game making, dating to the studios owned by Sony, Bizarre Creations and Evolution. However, Studio Liverpool, famous for its Wipeout series of racing games, closed in 2012, leaving about 100 games experts looking for jobs or companies to found.
Now it is home to a cluster of games companies that feature prominently in the narrative of the state of Britain’s digital economy as portrayed in the report by Tech Nation, the government-backed initiative.
Tech Nation is what the London-focused Tech City has broadened into now the government has decided to promote the growth of digital startups around the country, rather than just in Shoreditch and surrounding areas in the east of the capital.
In his new year’s message, the digital economy minister said the industry was expanding around the UK. “Digital fever has exploded from the cluster in east London, and has spread to every part of the country, making the UK truly a Tech Nation with more than 70% of digital businesses now based outside of the capital,” Ed Vaizey said.
Doubts about the government’s commitment to Tech North, the northern offshoot, were raised recently, when Claire Braithwaite, its passionate chief executive, resigned after less than a year in the job. Herb Kim, the executive chairman who is filling in during the interim, promises that the commitment to spreading the digital economy outside London remains as strong as ever.
For all its efforts at regeneration, Liverpool remains an embodiment of the north-south divide in terms of pure economics statistics. The employment rate is 61.2% compared with an average in UK cities of 71%. Output per person in terms of gross value added is £22,092, compared with £42,666 in London. House prices in the north-west average £183,000 compared with £531,000 in the south-east.
With such disparities in wealth and income, some believe the government should be doing more to encourage digital firms in order to help bridge the gaping north-south divide. The latest Centre for Cities study classifies 29 of 63 cities in the UK as having low-wage, high-welfare economies – including Liverpool.
The urban policy thinktank’s chief executive, Alexandra Jones, applauds the focus on the digital sector in northern cities such as Liverpool, but says education and training also need to be addressed if such initiatives are to contribute a real increase in long-term economic growth.
“Rather than artificially encouraging businesses to move – a policy that has historically had low success rates – the first priority should be addressing skills-gaps across the north,” she says. “Liverpool, for example, has one of the highest proportions of residents with no formal qualifications in the UK, and also has very low rates of GCSE attainment. Improving skills levels should be a central part of the government’s ’northern powerhouse’ initiative and should also be a key concern for local policymakers.”
Gaskell also thinks more could be done in terms of incentives. “The government is great at subsidising plant and machinery and other tangibles but in gaming we’re just talking about people,” he says.
Jonathan Holmes, founder ofMilky Tea, a rival games maker based a few doors from Gaskell’s office in the Baltic Triangle, tried working in London a few years ago but has since returned.
The 37-year-old is positive about being back in his hometown. “There’s a lot of games talent that is on the doorstep,” he says. “People realise they can not be everything on their own … I have loaned a coder and in return I have given up one of my animators for a period.” Milky Tea’s latest game, Coffin Dodgers, has just launched.
Mike Humphrey is the design director of Starship. When the virtual reality social media company was set up by former Evolution founder Martin Kenwright in 2014 there was a great support network, he says. “People lent us furniture, the [universities] lent us equipment. It’s a really nice atmosphere.”
Humphrey and the others say they have a good relationship with the local Studio School, where students are taught video game making and are often mentored by local entrepreneurs.
A tech sector with notable big names outside London has been a feature of the UK scene for many years. Sage, the FTSE 100 tech group, is based just outside Newcastle upon Tyne and, according to Tech Nation, 74% of technology companies are located outside the capital.
Liverpool stands ahead of inner London in terms of the growth of newly formed digital companies, with a 119% rate compared with 92%. Bournemouth leads the country, with a growth rate of 212%, according to last year’s Tech Nation report.
Last month the Edinburgh-based travel website Skyscanner and the North Yorkshire-based Anaplan became the latest UK unicorns – privately owned tech companies valued at $1bn (£700m) or more – when they raised $192m and $90m respectively.
Suranga Chandratillake, a venture capital partner at Balderton, says: “There are extremely strong clusters outside London. It is the right thing to promote these clusters.”
Balderton, whose past investments included Betfair and Bebo, has a stake in online retailer The Hut, based in the north-west and in the Exeter-based crowdfunding investment firm Crowdcube. “There’s always going to be a natural gravitational pull towards London but that doesn’t mean there won’t be other clusters that might thrive. As an investor you need to get out to see companies,” says Chandratillake.
There is clearly an advantage in having lots of creative people based in a convivial low-cost region, with access to a decent sized talent pool. But to grow, fledgling companies also need an ecosystem including lawyers, financiers and media coverage.
Holmes says that access to finance in Liverpool is tricky. “Instead of running to London I am going over to the US. It seems to be easier to access finance there. British investors tend to like tangible products,” he says. “We need to put companies in the spotlight globally. We’re terrible at shouting about what we do.”
Not everybody, however, supports a policy of actively encouraging the spread of digital startups around the country. Nic Brisbourne, managing partner of London-based technology investor Forward Partners, argues that it makes more sense to focus on the capital.
“Too much wealth inequality is unequivocally a bad thing and we desperately need to revive the less prosperous regions in the UK, but conflating regional development policy and startup ecosystem policy is a mistake that puts both at risk,” he says.
“Startup ecosystems need a significant minimum scale to operate effectively and the London area ecosystem is now only approaching critical mass while other hubs are a long way off and unlikely to become sustainable in the short to medium term.”
There is also a word of warning from Stephen Nicol, a regional economics expert from Regeneris Consulting: “It’s simply not realistic to expect every city in the UK to develop a genuine internationally competitive location for digital industries.”
Games creators such as Milky Tea’s Holmes are not going to let any such scepticism stand in their way. “I’m determined to make it work here,” he says.
When Cubbin talks of money being around in Liverpool he is speaking in the context of the rather modest £2m needed to fund his company’s next stage. If Liverpool and the Baltic Triangle is ever going to be taken seriously as a globally competitive tech cluster it might need to create a couple of unicorns.
“The key is to build resilience into the ecosystem,” says Starship’s chief operating officer, Clemens Wangerin, a veteran of the city’s tech scene since his days at Studio Liverpool. “It’s a question of time, money and resources but mainly time. One thing’s for sure, you need to be in the water to catch the wave.”