Planning for the digital economy

The digital tech sector is the UK’s fastest growing sector.    Recent statistics show that it is growing as much as 50% faster than the wider economy.  In London alone, a new tech business starts up every hour.  Beyond London, digital tech clusters across the country are driving the economic resurgence of many cities and city regions.

The rapid growth of the sector means that its spatial footprint has become increasingly evident in towns and cities across the UK.  In May, the Royal Town Planning Institute (RTPI) published guidance on how town planning can respond to and guide the future development of the digital economy.  It makes recommendations for planners in two areas:

  • how to encourage the growth of the tech sector in their local area; and
  • how to make best use of the opportunities provided by the tech sector for the planning system

What is the tech sector?

The digital tech sector is increasingly diverse, and there is no straightforward definition.  The 2016 Tech Nation report identified 16 different sectors, some of which include:

There are currently around 58,000 active digital tech businesses in the UK.  It employs 1.64 million people, and job growth is more than double that of other sectors.  Roles are generally highly skilled and well paid, compared to other sectors.  Indeed, the average salary is 44% higher than the national average!

Location preferences

Digital tech, as a sector, thrives off well-planned spaces with access to good local infrastructure.  Tech firms and their employees tend to prefer easily accessible, walkable, multi-use districts. This results in the creation of ‘clusters’ of similar firms in central urban locations.

Clustering has a number of advantages for digital tech businesses – including easy access to large talent pools and the ability to network and exchange ideas face-to-face with local, likeminded businesses and employees – a key driver of innovation.

London, Manchester and the Greater South East have some of the largest digital tech clusters in the UK; however, the Tech Nation 2017 report mapped 30 significant clusters across the length and breadth of the UK – from Dundee to Exeter.

Facilitating the growth of the sector

The recent growth of the sector has already led to a number of economic policy responses, including the development of enterprise zones, innovation and business centres, and ‘innovation districts’.  The RTPI guidance also highlights a number of smaller-scale responses that can be utilised to attract and foster tech industry growth, including:

  • ‘de-risking sites’ by making sure that planning requirements are “practical, clear and known in advance of specific proposals coming forward
  • using public money for assembling and servicing sites that are more challenging
  • the provision of Wi-Fi in specific locations
  • making districts pedestrian and cycling friendly
  • leveraging Public Private Partnership models to build digital infrastructure

In addition to these responses, the RTPI makes three recommendations for planners on how they can create an environment that is attractive to digital tech firms.

First, it suggests that planners should monitor the local economy to get a sense of what local growth industries are.  Policies can then be adapted to local economic conditions.  Some local authorities already do this using company registration data.  For example, Camden Borough Council use this data to inform a quarterly ‘Business and Employment Briefing’.  It covers a range of measures, including business size and type, employment in the borough, commercial property, unemployment, worklessness and qualifications.

In order to attract and assist the growth of the digital tech sector, it is important for local planning teams to have a proper understanding of the sectors’ spatial preferences.  This is particularly important when drawing up local plans.  Therefore, the second recommendation made by the RTPI is that local authorities should employ someone to engage with local tech firms to find out how planning could help to better facilitate their growth. The roles of The Dublin Commissioner for Startups and the Amsterdam Chief Technology Officer are potentially interesting models for this.

Third, the RTPI recommends ensuring that there is sufficient housing, office space and transport infrastructure to meet capacity.  These three elements are the “fundamental ingredients for an economically and socially successful city”.  Without them, no amount of other interventions will attract firms to an area.

The Tech Nation 2017 report found that 30% of digital tech community members cited their local transport infrastructure as a ‘business challenge’.  Tech London Advocates report similar concerns, whilst also highlighting the challenges posed by digital infrastructure: “It has become increasingly clear that a fundamental challenge facing tech companies in London is infrastructure. The tech sector has grown so fast that the provision of office space and digital connectivity is having to play catch up”.

The digitisation of planning

The growth of the digital tech sector not only creates jobs and generates wealth; it creates opportunities for improved efficiency in other sectors too.  In planning, digitisation can free up time and resources, and create new tools for planners to utilise.  From the adoption of  geographic information system (GIS) software for mapping, to experimental trials of 3D modelling software and virtual reality in plan making and community engagement, technology has and continues to present a number of opportunities to improve the planning system.

Beyond planning, innovations in the digital tech sector aid the creation of ‘smart cities’ – where information and communication technology (ICT) and ‘Internet of Things’ (IoT) technologies are integrated to manage cities’ assets, with the overall aim of improving efficiency.  Examples of potential usage vary considerably, from supporting people with disabilities or chronic illnesses, to the provision of real-time traffic data, controlling streetlights and monitoring environmental data.

As such, a final recommendation made by the RTPI is to make use of local firms’ skills and resources to address cities’ infrastructural challenges.

Addressing inequality

Despite the rapid growth of the digital tech sector and its contribution to job and wealth creation, there is an increasing recognition that the benefits created by the sector can be insular and often do not spill over to the local economy.

Indeed, studies have found that the higher the share of tech employment in a city, the more income inequality there is.  On this basis, the digital tech sector has been criticised for its potential to create a ‘two-tier economy’.  There are also concerns about the gentrifying effects of digital tech clusters on local areas.  In London, for example, tech growth has increased the cost of living in some parts of the city, displacing smaller firms and lower income families.  It also poses a potential threat to innovation as startups are priced out of successful digital tech clusters.

Clearly addressing these issues poses some significant challenges for policymakers.  Last year, the RTPI made a number of recommendations in this regard, including helping local people to develop the skills needed by local tech companies.

Successful planning

The digital tech sector has enormous potential to enhance economic growth.  Through its ability to create the optimal conditions for the digital tech sector to thrive, planning can help to encourage this growth.  Understanding local economic trends, consulting with digital tech businesses about their needs, and ensuring that local infrastructure has the capacity to meet these needs, are vital to successful planning for the digital tech sector.  At the same time, ensuring that this growth is sustainable and benefits wider society are key challenges for planners.

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