Bringing high tech business to the North East

Putting in place the infrastructure for new kinds of business requires vision and leadership.

Everyone knows the phrase "coals to Newcastle". This is a tale of "software to Cambridge". From Newcastle. When I started my business thirty years ago it seemed far-fetched. There were less than 10 technology businesses in the whole of the North East. Now there are over 300, from software to computer games to cloud computing. Only London has a higher rate of high tech start ups. So we are doing our bit for "rebalancing" the economy.

The obvious questions are why and how? The simple answer is that while some industries depend on capital to get going, for technology companies it is people.  Software and computer games are by their very nature "weightless" products that can be sold in every corner of the world over the internet without any significant transport costs – the exporter’s dream. If you can sit a talented programmer or a creative designer in front of a computer, they can be producing saleable products that are instantly exportable.

The greatest asset for any region is its universities. The greatest problem in the North East is raising the aspirations of our own population to go to them. In a global competition for talent, you need places "where talent wants to live". This means that you need to have a buzzing music and cultural scene – Newcastle has been voted one of the world top party cities - good affordable housing and easy ways to get to work. Tyneside and the rest of the region has a justifiable reputation as a great place to be and this has been fostered over the last decade by a combination of strategic, long-sighted public investment in creative and cultural infrastructure like the Sage Gateshead, and the establishment of organisations like Generator who support the music industry and make events happen.

University involvement and partnership with business has grown by encouraging graduate internships and establishing "hatcheries" nurturing embryonic businesses. Publicly-funded initiatives like Sunderland Software City and Digital City on Teesside have been able to provide guidance, mentoring, premises, and networking for new business. Organisations like North East Access to Finance help fund the growing numbers of start-ups and high growth companies.

I chaired the Regional Development Agency until it was closed this year. Its founding idea – that public and private sectors need to support each other - is right. Here are three things that would make the biggest difference in the next ten years. Firstly, there needs to be more productive and innovative partnerships between the private sector, the universities and the public sector. Each offers different elements to the mix. Entrepreneurial ideas and drive, a trained and educated workforce coupled with innovative research and development in the right "connected" locations are the fundamental building blocks for this industry. Secondly businesses like this need finance. Often UK banks are reluctant to lend to this sector so we need to create small grants that allow clever people to test ideas and then more substantial equity investments as businesses mature and develop. Finally we need vision, leadership and role models. People who see what the North East's economy could look like and have the ambition, drive and determination to make it happen. The region has changed much since the dark days of the Likely Lads, what we need for the future is tomorrow’s Bob and Terry having Masters degrees in software engineering and creating world-leading software.

Paul Callaghan is Chairman of Leighton, the North East-based technology, software, media and communications group that he founded.

The sun sets behind the Tyne Bridge. Photograph: Getty Images
Getty
Show Hide image

Arsène Wenger: how can an intelligent manager preside over such a hollowed-out team?

The Arsenal manager faces a frustrating legacy.

Sport is obviously not all about winning, but it is about justified hope. That ­distinction has provided, until recently, a serious defence of Arsène Wenger’s Act II – the losing part. Arsenal haven’t won anything big for 13 years. But they have been close enough (and this is a personal view) to sustain the experience of investing emotionally in the story. Hope turning to disappointment is fine. It’s when the hope goes, that’s the problem.

Defeat takes many forms. In both 2010 and 2011, Arsenal lost over two legs to Barcelona in the Champions League. Yet these were rich and rewarding sporting experiences. In the two London fixtures of those ties, Arsenal drew 2-2 and won 2-1 against the most dazzling team in the world. Those nights reinvigorated my pride in sport. The Emirates Stadium had the best show in town. Defeat, when it arrived in Barcelona, was softened by gratitude. We’d been entertained, more than entertained.

Arsenal’s 5-1 surrender to Bayern Munich on 15 February was very different. In this capitulation by instalments, the fascination was macabre rather than dramatic. Having long given up on discerning signs of life, we began the post-mortem mid-match. As we pored over the entrails, the curiosity lay in the extent of the malady that had brought down the body. The same question, over and over: how could such an intelligent, deep-thinking manager preside over a hollowed-out team? How could failings so obvious to outsiders, the absence of steel and resilience, evade the judgement of the boss?

There is a saying in rugby union that forwards (the hard men) determine who wins, and the backs (the glamour boys) decide by how much. Here is a footballing equivalent: midfielders define matches, attacking players adorn them and defenders get the blame. Yet Arsenal’s players as good as vacated the midfield. It is hard to judge how well Bayern’s playmakers performed because they were operating in a vacuum; it looked like a morale-boosting training-ground drill, free from the annoying presence of opponents.

I have always been suspicious of the ­default English critique which posits that mentally fragile teams can be turned around by licensed on-field violence – a good kicking, basically. Sporting “character” takes many forms; physical assertiveness is only one dimension.

Still, it remains baffling, Wenger’s blind spot. He indulges artistry, especially the mercurial Mesut Özil, beyond the point where it serves the player. Yet he won’t protect the magicians by surrounding them with effective but down-to-earth talents. It has become a diet of collapsing soufflés.

What held back Wenger from buying the linchpin midfielder he has lacked for many years? Money is only part of the explanation. All added up, Arsenal do spend: their collective wage bill is the fourth-highest in the League. But Wenger has always been reluctant to lavish cash on a single star player, let alone a steely one. Rather two nice players than one great one.

The power of habit has become debilitating. Like a wealthy but conservative shopper who keeps going back to the same clothes shop, Wenger habituates the same strata of the transfer market. When he can’t get what he needs, he’s happy to come back home with something he’s already got, ­usually an elegant midfielder, tidy passer, gets bounced in big games, prone to going missing. Another button-down blue shirt for a drawer that is well stuffed.

It is almost universally accepted that, as a business, Arsenal are England’s leading club. Where their rivals rely on bailouts from oligarchs or highly leveraged debt, Arsenal took tough choices early and now appear financially secure – helped by their manager’s ability to engineer qualification for the Champions League every season while avoiding excessive transfer costs. Does that count for anything?

After the financial crisis, I had a revealing conversation with the owner of a private bank that had sailed through the turmoil. Being cautious and Swiss, he explained, he had always kept more capital reserves than the norm. As a result, the bank had made less money in boom years. “If I’d been a normal chief executive, I’d have been fired by the board,” he said. Instead, when the economic winds turned, he was much better placed than more bullish rivals. As a competitive strategy, his winning hand was only laid bare by the arrival of harder times.

In football, however, the crash never came. We all wrote that football’s insane spending couldn’t go on but the pace has only quickened. Even the Premier League’s bosses confessed to being surprised by the last extravagant round of television deals – the cash that eventually flows into the hands of managers and then the pockets of players and their agents.

By refusing to splash out on the players he needed, whatever the cost, Wenger was hedged for a downturn that never arrived.

What an irony it would be if football’s bust comes after he has departed. Imagine the scenario. The oligarchs move on, finding fresh ways of achieving fame, respectability and the protection achieved by entering the English establishment. The clubs loaded with debt are forced to cut their spending. Arsenal, benefiting from their solid business model, sail into an outright lead, mopping up star talent and trophies all round.

It’s often said that Wenger – early to invest in data analytics and worldwide scouts; a pioneer of player fitness and lifestyle – was overtaken by imitators. There is a second dimension to the question of time and circumstance. He helped to create and build Arsenal’s off-field robustness, even though football’s crazy economics haven’t yet proved its underlying value.

If the wind turns, Arsène Wenger may face a frustrating legacy: yesterday’s man and yet twice ahead of his time. 

Ed Smith is a journalist and author, most recently of Luck. He is a former professional cricketer and played for both Middlesex and England.

This article first appeared in the 24 February 2017 issue of the New Statesman, The world after Brexit