Silicon Shore: How Newcastle Quietly Became A Tech Hub
Twenty years ago Newcastle was run down and destitute. Now it's home to the U.K.'s second most vibrant tech sector behind Silicon Roundabout. And those involved see no reason it can't be one of Europe's brightest lights too.
NEWCASTLE UPON TYNE, United Kingdom — Newcastle is a good night out.
Wednesday is sports night, with skimpily dressed university hockey players making eyes across the dance floor to burly rugby players at any number of clubs across the city. By 3 a.m., they'll pour into taxis and tip themselves out into beds. But at The Ware Rooms, an industrial-looking bar where around 40 men and women, both young and old, lean up against steel girders and put their pint glasses down on bare wooden tables, things are much more sedate. Around half the cohorts have left by 10 p.m.
While students inject life into Newcastle's economy by buying lurid trebles and warmed-over kebabs, those at The Ware Rooms on the outskirts of the city are powering the economy. They're building things in the region for the first time in decades.
There was a time when Newcastle was one of the industrial powerhouses of Great Britain, and was home to many innovators. The first lightbulb was invented across the river in Gateshead by Joseph Swan, a year before Thomas Edison demonstrated his prototype; the Rocket, one of the first modern trains, came from the city; Turbinia, a small ship now in dry dock at an inner-city museum, was the first good working example of a steam turbine invention.
There was coal mining in the countryside around the city, and shipbuilding at its nearby docks. But those closed down, and two decades of destitution followed.
Since the millennium things have changed, and it's no longer coal, but code, that locals are shipping out of the city. Newcastle is a tech hub.
According to a 2013 report by Lord Adonis, more than 25,000 workers are employed in the tech industry in the region, which has the second-highest rate of new startups in the U.K. behind Silicon Roundabout in London. Last year Richard Exley, a wise old man formerly of Northstar Ventures, a Newcastle-based venture capital company, to whom the younger people in attendance at The Ware Rooms gather round and listen to attently, said that the region was at critical mass. And evidence is mounting that most measures of the tech sector are undercounting businesses and employees, disguising its real size.
Local council and national government are kicking in £9 million of investment to see super-fast fibre-optic broadband brought to 97% of the city's population, giving speeds of up to 80 Mbps. Thinking Digital, a world-renowned tech conference held at The Sage Gateshead, will be celebrating its seventh year in May. Its creator, Herb Kim, is a transplanted New Jerseyite who first arrived in the region in 2002. Though he's since moved to Liverpool, he still schleps across the Pennines every week, so strong is his connection to the region. "It's the most American place I've seen in the U.K.," he tells me. "I came in without the misplaced pre-conceptions that Britons can have about Newcastle and loved it."
It's not just small, young, fleet of foot businesses that are thriving, either: Sage, a software company supplying 6.3 million customers globally and with an annual revenue of £1.4 billion, is the only tech company in the FTSE100 — and has been based in the North East for all of its 33 years. "It would be nice if instead of reading politicians saying things like 'We need a British Google or Facebook' they said 'We need more companies like Sage'", says Paul Lancaster of Sage. Slowly, politicians are recognising the region: HMRC has based its new Digital Delivery Centre in Newcastle, is hiring, and is hoping to totally overhaul the way Revenue and Customs' website works.
"Startups in general get a lot of press because they're sexy and new. Newcastle's also interesting because it has the companies that aren't that sexy but are making a lot of money," explains Paul Smith over a beer in a corner of The Ware Rooms. He's the director of Ignite100, a startup accelerator, and has just returned about two hours ago from a roadshow around the country, advising other fledgling tech hubs on how best to grow their cities.
There are probably a few dozen tech companies earning tens of millions each year based in the region, but because they focus on IT systems for retirement homes or U.S. prisons, they're not covered in the press. "And that's before you get to the multinationals like Proctor & Gamble," he adds. "We're not a half a dozen startups trying to shout loudly. Newcastle is genuinely an environment that takes you through the whole scale of companies."
Ignite100 was the first in Europe to offer a £1 million pot of cash to startups at the small end of the scale. Their latest funding round raised £700,000, a fifth of which was from Northstar Ventures. Significantly, the remainder came from angel investors based outside the region — Newcastle-based startups are now an internationally investable prospect. They're also attracting entrepreneurs from outside the region to come and set up camp in Newcastle.
Campus North, a 10,000-square-foot collaborative workplace in the centre of Newcastle planned by Ignite100, promises to continue the good work in the city. Ignite100 sought £12,000 of the five-figure cost of the development via Kickstarter. Within 29 hours it had beaten its goal. Smith wasn't overly surprised.
"Newcastle has always been strong in terms of technology. To be a wanker about this, it's where the trains were invented, street lights were invented. Interestingly, like Manchester, it's where the Industrial Revolution happened. Somewhere along the line, I think Manchester, because of its position being treated as a second city, they got dragged away from that.
"Industry has been here 300 years," Smith says, smiling. "We're also one of the places London-based media companies will go to to build their northern outposts. We were one of the first television regions; one of the first radio regions."
That put Newcastle and the North East in good stead. "When digital came along, a shitload of people were trained. We could do this stuff."
A lack of bluster, and a propensity to action also helps: "The temperament of the North is just to get your head down and work. Manchester always feels like it's a bit chippy; it's not London. Newcastle just gets on with it."
There are, of course, other benefits to Newcastle too. Paul Rawlings, a boisterous man with a wicked sense of humour, shouts his chief reason for being based in Newcastle over the background din.
"Five words: Cost of beer is cheap," he says in his Mancunian burr. Rawlings is the CEO of ScreachTV, a three-year-old company that places interactive entertainment on in-pub television screens. Starting in Newcastle, the company has since set up outposts in London, New York, and Romania.
There's a serious point to Rawlings' joke. London is insanely expensive, with an almost unfeasibly high cost of living. According to the Office for National Statistics, the average household in London spends nearly 40% more than a household in the North East just to get by. The one thing most startups — companies right at the beginning of their development — don't have is ready cash.
"For a startup, the number-one rule is don't be dead," says Smith. One sure way to ensure that you're going to be on life support if not already affected by business rigor mortis is to sink £600 a month into a crummy shared hovel in Shoreditch when you can get a comfortable three-bedroom house for the same price in Newcastle. Staying alive is much easier when you've a roof over your head at an affordable price.
"Retention isn't measured by the number of West End shows you have, or restaurants," says Smith. "It's about quality of life and surroundings. We can offer lifestyle in a way London can't."
There is an acknowledgement that Newcastle as of yet isn't strong enough to stand on its own, though. It needs to face outwards (hence many of the startups founded here have subsequently established a base in London), and can benefit from working between the two.
There isn't a shortage of skilled workers coming out of regional universities. More than half the North East's IT and telecommunications graduates stay in the region after university. Ten percent go to London as part of the great national brain drain. A young Jony Ive, who graduated from Newcastle Polytechnic (now Northumbria University, the region's third-best higher learning institute) in 1989, eventually made his way to Apple. He's largely responsible for the design of the gizmos many of you reading this have in your pocket right now.
Another problem is one of mentality. When we spoke, Smith had just returned from South by Southwest, a tech festival held in the U.S. He met lots of fresh-faced graduates.
"They come out of university thinking, What can we try, what can we do? It's not, 'I should go and work in a corporate right now.' Here in the U.K., you graduate and say, 'Right, it's time to get a job.' Very few think 'I have the skill-set to change the world.' We haven't got that gung-ho American dream-ness."
Sage's Paul Lancaster agrees: "Too many people, particularly young people, still believe that they have to move outside the region — London being the obvious example — to find 'a good job' and forge a career."
Some companies are making the best of both worlds, their owners commuting between the capital — where much of the money still is — and the North East, where cheaper engineering talent resides. It's not as strange as you'd think: Though many might think London and Newcastle a world away, they're a 40-minute flight, or a two-and-a-half-hour train journey, apart. Some commuters from the shires can spend as long getting to work in the capital every day.
Besides, reasons Rawlings, "A lot of stuff is happening outside of London now that a lot of people don't know about. That's the problem with this area. We're not the best at shouting about the cool shit we've got."
Case in point: Dylan McKee.
McKee came up to me at the bar while I was talking to Michael Dunn, a former employee at one of the many video game development companies in Newcastle and neighbouring town Gateshead who has since gone on to found Gospelware, a mobile development studio that counts the BBC, Disney, and the NHS as clients. McKee's an unprepossessing 18-year-old in a slouchy hoodie who has a wide and easy smile, and someone Dunn introduced as a person he was trying to convince to come work for him.
McKee's still at school — sixth form, to be precise — at Whitley Bay High School, 10 miles outside Newcastle city centre.
We got talking, about school, about the region, and why he liked coding.
It was five minutes before he mentioned that he'd been flown out to Apple's headquarters in Cupertino, Calif., because of his skill. It took him another five minutes until he mentioned that his first app, myAltitude, coded when he was 13, had a million downloads – enough to keep him in "pocket money," when he eventually got around to putting ads on his free app a few years later, he coyly explained.
Dunn, swirling the dregs of his beer around the bottom of his glass, chipped in. "Now you see why I want to hire him."
McKee could feasibly have his pick of jobs, here and elsewhere. But he's a homebody, happy to stay here. "We're not all stuck down the coal mines. We're a forward-thinking creative and digital place."
McKee is abnormal in that he is largely self-taught. The level of expertise offered at classes at school is far below his actual ability, and it's likely that a university degree would be too. To be a startup entrepreneur, you have to be built a little differently. You have to, as McKee and Dunn and Smith and all the others in attendance this night did, teach yourself things off your own back.
But there are a thousand Dylan McKees at schools across the country, and across the region. And though Newcastle is being lauded for its up-and-coming status, as U.K. tech's hot new thing, its residents don't want to be a flash in the pan. Longtermism is the goal.
That's why Ignite100 has sunk five figures into Campus North with a business plan that at its rosiest shows them just breaking even. It's why there's an appeal to those in attendance to help out at Code Club, an initiative where members of the startup community go into inner city schools to teach kids how to code.
"I can't think of any single initiative in Tech City that looks at students," says Smith. "The problem is that it's always of the moment. Your success is defined by what is happening right now. Nothing that happens in 10 years matters."
It partly answers a question that bugs me all night. Looking out the window of The Ware Rooms, beyond a lap dancing club, there's the shadow of the Byker Wall, an infamously run-down council estate. The North East, and Newcastle, still has its issues. Employment is the lowest in the U.K., and more people claim benefits here than anywhere else. The startup sector is drawing accolades, and people from abroad eager to nurture their ideas here, but what about the poor kid of a single parent? How does this help them?
Paul Smith rubs his forehead and mulls it over. "It's a good point," he admits.
"Can we try and fix everything in Newcastle? No. Can we try and fix what's in our control? Yes. Do we want to? Actually yes. We can't do it all, but Code Club is educating the people in those council houses. What happens in 10 years time matters the square root of fuck all to us now. There's nothing in it for us, except that it will make a difference at some point.
"We can't be Silicon Valley. But we can be a centre for innovation, excellence, and entrepreneurism in the U.K. that doesn't try and rival London, but exists in harmony with it. And realistically, I think if we get our shit together, in five years time we're top 10 in Europe."
Suddenly it's 11 p.m., and the bar staff are going round tables asking people to leave. Everyone shuffles off into the night. Everyone's still talking about big ideas. Everyone's excited.