For years, the UK’s tech story followed a familiar pattern. The country excelled at research and innovation but struggled to turn those strengths into globally significant firms. Start-ups could form, and often did, yet too many failed to scale. Founders ran out of money before reaching critical mass, and promising ideas stalled. It is one reason the United States has pulled so far ahead in growth over recent decades.
That picture has changed. Over the past decade, the UK has built a much deeper pool of early and growth capital. Companies can now raise substantial funding as they expand, supported by a more mature ecosystem. The constraint has not disappeared, but Government has done a great deal to ease it.
But solving that problem has exposed another. When you look at where companies actually scale, the UK does not resemble a balanced, national system. It is highly concentrated.
Data from Beauhurst shows that roughly three-quarters of UK unicorns are based in London. Beyond that, there is a smaller cluster in the North West, overwhelmingly centred on Manchester (a sad admission from a Liverpool resident). After those two hubs, the picture drops away quickly.
Source: https://www.beauhurst.com/research/unicorn-companies/
Even more pointedly, every firm on the list is headquartered in a major city (or in the Oxford-Cambridge Arc). That reflects something fundamental. Companies do not scale in isolation. They grow in dense, well-connected urban environments where capital, talent and customers are within easy reach. At a personal level, founders often exit one company and set up their next one down the road. London offers this in abundance. Manchester, increasingly, offers a version of it too.
Both combine proximity to investors with deep labour markets and a critical mass of firms. In Manchester, that is visible around the city centre and Deansgate: tall commercial buildings, dense clusters of serviced offices, and a steady churn of scaling companies sharing space, talent and networks. It is not identical to London, but it follows the same underlying logic.
None of this should be surprising. Urbanisation has been a core feature of economic growth since prior to the industrial revolution.
Too much political thinking still assumes that growth can be spread evenly across places. With just enough small interventions, every area can develop its own tech ecosystem, screams the constituency MP. This instinct sits behind towns funding programmes and the steady drip of levelling up money into places that were never going to generate high-growth firms at scale.
Economic activity clusters in physically dense spaces, and it always has.
Crucially, the benefits of clustering do not stop at city boundaries. Strong urban centres raise incomes and expand opportunities in surrounding towns and villages, particularly where commuting is realistic. A successful Manchester has spillover effects across the wider North West (even to Liverpool).
The UK’s problem is not that its leading cities are too dominant. It is that most of them are not productive enough. Compared with international peers, many large UK cities underperform, dragging on both their own economies and the regions around them.
So how do you build a productive city that can support its own tech cluster?
It means investing heavily in transport so people can move quickly within cities and from surrounding areas. It means building enough housing for workers to live near jobs. It means making it easier to deliver office and lab space at speed, including dense, flexible workspace. And it means accepting a level of physical density, including taller buildings, that is often politically contentious.
Above all, it means concentration.
Government should back a handful of big cities more aggressively. By definition, that means not backing everywhere equally. It means fewer small announcements spread thinly across the country and more substantial bets in places that are already showing they can scale.
This is where politics becomes difficult. Everyone says they want growth. Far fewer are willing to accept what it requires.
Retail politics prefers balance, or at least the appearance of it. It rewards spreading money widely so every place can point to something. Every MP wants to post about the funding they’ve secured for their villages, not a pot of cash that went to their local city centre miles away.
But if the goal is to produce globally competitive companies, that instinct is actively unhelpful.
The UK has already done the difficult part on capital. Firms can start, raise money and get off the ground. The constraint now is more basic. Do they have somewhere to scale?
At present, the answer is largely London, with Manchester emerging as a credible second model. Nowhere else is particularly viable.
Until that changes, the outcome will remain the same. If Britain wants more unicorns and more large, productive firms more generally, it needs to stop pretending growth can be evenly distributed and start choosing where it will happen.Find out more about our work on technology
