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Which is the better location for IT contractors in the UK? The north or south?
Traditionally, the answer to this question was always the south. After all, the vast majority of the nation’s wealth is concentrated in London. This translates into higher day rates for contractors. Seems like a no-brainer.
However, with significant government investment into the creation of a ‘Northern Powerhouse’ things are beginning to change. As a IT contractor, making the decision between north and south is not as clear cut as it was before.
With lower costs of living, easier commutes,a thriving startup scene, and an increasing number of contract opportunities, many freelancers are now relocating to cities like Manchester, Leeds, and Liverpool.
Firstly, let’s take a look at how the north and south compare in terms of IT contractor day rates. (In the interest of clarity, we’ve bench-marked our figures around the role of a Front-End Developer in both London and the hub of the Northern Powerhouse, Manchester)
How do day rates compare?
At the time of writing, IT Jobs Watch lists the Median Day Rates for a Front-End Developer as:
For a contractor working 22 days a month this equates to:
London: 450 x 22 = £9900 per month (before tax)
Manchester: 375 x 22 = £8250 per month (before tax)
Based on these figures alone London is the clear winner. But as we all know, the cost of living in London is much higher than Manchester.
According to the cost of living comparison website, Numbeo, if you are earning £9,900 in London you only need to earn £6,731 in Manchester to maintain the same standard of life. That’s a 38.1% difference.
So our Front-End Developer earning £8250 per month in Manchester would need to earn £11385 in London to have the same standard of living.
Breaking this down into day rates, a contractor on £375 per day in Manchester would need to earn £517 per day (11,385 / 22) in London to maintain the same standard of life.
In short, this means that Front-End Devs in London need to earn an additional £67 a day on top of the median day rate to keep up with their peers in Manchester:
517 (equivalent day rate) – 450 (actual day rate) = £67
So while day rates are lower in Manchester than London, the savings you make on rent / mortgages, and consumer prices more than make up the difference.
More than money
As well as this financial advantage, there are a range of other reasons why IT contractors are making the move ‘up north’.
In fact, according to an analysis conducted by MoneySuperMarket.com Manchester came out on top as the best city in the UK to be a contractor. Leeds also did well, coming in 6th, just one place behind London.
The North West tech sector boom
A report by RSM found the number of new tech companies set up in the North West rose by almost 30% in 2017. The firm found in total, there were 707 software development and programming businesses incorporated in the region in 2017 – up from 550 in 2016.
This amounted to the third highest number of tech companies in the UK in 2017, after London and the South East. These figures show the North West tech sector is growing at a very healthy rate despite fears of a post-Brexit slowdown.
Jonathan Lowe, technology lead at RSM, outlined the factors he feels are underpinning this growth period.
“The region’s universities are playing a key role in developing and nurturing exceptional talent and the country as a whole is continuing to attract the world’s brightest and best. The North West has had a number of recent technology success stories and this is leading to real momentum in the growth of the sector.
“Entrepreneurs are able to gain good access to finance, either through traditional sources of debt at relatively cheap rates, or from venture capitalists and private equity funds” he said.
Looking ahead, undoubtedly there will be a strong political will to build momentum and generate further growth as part of the government’s overall industrial strategy. Government investment in the ‘Northern Powerhouse’ is clearly paying off.
The shifting balance of power
Manchester has the potential to become a real UK super city, doing for the North West what London has done for the south. It’s been developing slowly but surely for the last decade and is now crying out for an influx of technical talent from the south.
The North West is already home to several well renowned universities full of bright young tech talent from up and down the country, a good percentage of which choose to stay in the region after graduating. The more graduates that stay in or move to the North West after graduating, the more attractive the region will become to employers.
If enough talented IT contractors decide to venture north and join these graduates then we will start to see what economists term ‘agglomeration benefits‘. Cities like Manchester, Leeds, and Liverpool will start to strengthen their own pull on technical talent and reduce the pervasive pull London has on the rest of the country.
With the right influx of talent the North West has the capability of creating its own smaller, friendlier tech bubble with a force big enough to rival London.
Interested in taking on a contract in the North? We can help you find the right role. To discuss your requirements, contact Adam Ferguson, Head of our North Recruitment Team: email@example.com 0161 850 1155 / 07432744765