Business and regional bodies say improved connectivity can drive productivity growth in the digital sector across much of the UK. This can contribute to closing the gap between the best and worst performing areas, according to a new study published by HS2 Ltd.

Drawing on evidence from over 100 employers, local authorities and universities, HS2: Getting the best out of Britain, highlights the regional strengths of highly skilled manufacturing clusters, universities and research centres, and cutting edge technology entrepreneurs, but warns that more needs to be done to draw them together and realise their full potential in the modern economy.

Comparing London’s highly-efficient transport network with the connectivity that exists within and between city regions in the Midlands and the North, the study argues that there is a direct link between productivity and connectivity, and that HS2 will improve access to the finance, mentorship and professional networks that are vital for small businesses, start-ups and entrepreneurial firms to grow.

The digital sector is a significant source of growth and employment in the UK, employing over 1.6 million people and with turnover that grew by over 20 per cent between 2011 and 2015.[i] Digital businesses are especially dynamic, with 17 percent of digital businesses with 10 or more employees classified as high growth, compared to 10 percent of businesses of the same size in non-digital sectors. The North of England is home to digital clusters that employed over a quarter of a million people in 2014

Growth finance and the mentoring and advice that investors often provide for these businesses is more readily available in London and the South East than in other parts of the country. HS2 will help to narrow the regional financing gap by providing fast, frequent and reliable transport links between London-based investors and businesses in the Midlands and North.

David Higgins, Chairman of HS2 Ltd said:

“This report is the evidence that HS2 will boost productivity in the north and midlands. This is a once in a generation opportunity to join up and amplify the many centres of excellence around the country, as we prepare to exit the European Union.

“By improving the connectivity between our major population centres HS2 will give business access to the skills, labour and services they need to change the economic geography of the country.”

The report, to be launched at an event in Nottingham later today, demonstrates that by joining up the major conurbations around the country, HS2 will enable a greater pooling of people and capital around the regions of the UK. This connectivity will enable businesses in the North and the Midlands to gain better access to new markets, investments, and become more globally attractive.

Chris Grayling MP, Secretary of State for Transport said:

“This study clearly shows transport investment is crucial to a strong and resilient economy. That's why we are investing in all forms of transport including the biggest rail modernisation programme for over a century to improve services for passengers – providing faster and better trains with more seats.

“As Britain's new railway, HS2 will deliver vital links between some of our country’s biggest cities, driving economic growth and productivity and helping to deliver the Government’s Industrial Strategy.

"By bringing our major cities, regions and communities closer together we are encouraging business and innovation and building a Britain that is fit for the future with a stronger economy and fairer society."

HS2 will also connect with the wider transport network, including improvements to regional transport links being taken forward by Midlands Connect and Northern Powerhouse Rail. This will spread the benefits of HS2 to digital businesses right across the Midlands and North of England.

Richard Gregory, Director of Tech North, said:

“Access to early-stage finance remains a barrier to growth for digital businesses in the North.  Angel investors in London will rarely travel 2 to 3 hours to meet with digital businesses and provide mentorship and advice. Faster and more reliable rail links will make investments in the North’s thriving tech clusters more attractive.”

HS2 will serve around 30m people and directly serve more than 25 stations, joining up the dots between where we are now, and where we could get to as a country - a combination of more capacity and better connectivity will improve accessibility, and, therefore, productivity in the Midlands and the North – at the same time as easing the pressure on London.