Midlands technology sector snapshot in Q4 2026

Q3 of 2026 featured a strong line-up of tech weeks in the Midlands, including Birmingham Tech Week and Gloucestershire Tech Week. None of them give an accurate snapshot of the technology sector, but we took the prompt and decided to prepare a short profile of the sector.

It is based on published materials that we are aware of, such as public sector regional strategies; regional and sub-regional analyses, for example by accountancy firms; innovation reports, such as Bruntwood’s recent report, Built to Scale; sector-specific online newsletters, such as HealthTech sector newsletters; and news reports.

We have taken in the West Midlands, East Midlands and South Midlands – a region with our Birmingham office nearly at its centre.

1. Growing pipeline of technology start-ups

Analysis reported by RSM UK earlier in the year found:

• 955 incorporations of technology companies in the West Midlands in Q1 of 2026, up 40% from 681 in Q1 of 2025
• 566 incorporations of technology companies in the East Midlands in the same period, up 49% from 379
• 16,887 incorporations of technology companies nationally, up 39% year on year.

The growth was particularly associated with software development, AI-led services, SaaS, health technology and analytics businesses.

These figures indicate a healthy start-up pipeline, although they count incorporations and not necessarily active, funded or revenue-generating technology businesses. The region has many universities with active spin-out and innovation teams to cultivate entrepreneurial researchers, and several independent organisations, for example Bruntwood, provide facilities specifically for young businesses.

Compared with the mature ecosystem enjoyed by Cambridge, for example, there is no doubt that the Midlands has many systemic gaps where support for young technology businesses is simply not present, visible or accessible.

2. Technology largely serves existing verticals

In this region, while there are certainly strengths in some ‘pure’ technology fields, technology demand and supply are concentrated primarily within or aligned to established sectors:

• Birmingham’s technology strength is in financial services, professional services, healthcare and digital creative industries
• Coventry and Warwickshire are particularly strong in automotive and mobility technology, batteries, advanced manufacturing including robotics and industrial R&D
• Nottingham is a recognised centre for life sciences, digital health and data analytics
• Derby has aerospace, rail and manufacturing technology
• Leicester has space, health technology and manufacturing
• Lincolnshire has AgriTech and robotics
• Loughborough has sports technology
• The East Midlands Airport area provides a natural logistics-technology market
• The Midlands region as a whole, taking in the Marches and south Midlands down to Gloucestershire, features pure technological strength in the fields of software, AI, cyber security and emerging technologies that are still in the labs of the region’s huge cluster of research universities and teaching hospitals.

It’s worth observing that the West Midlands Combined Authority’s technology sector strategies and plans feature pillars and clusters in broadly the same fields: advanced engineering, health, digital and creative, professional and financial and clean/smart energy.

3. Leading technology segments

AI features strongly in the Midlands’ profile, but again it is in the service of established industries and areas of strength. Initiatives that are reaching the headlines are focused on taking frontier large language models or other forms of machine learning and AI, and applying them in fields such as:

• Professional and financial services
• Predictive and adaptive manufacturing
• Logistics optimisation
• Medical diagnosis and health-service productivity
• Mobility and transport, including electric vehicles, for example Maeving in Coventry
• Industrial technologies, for example Sarginsons sand-core 3D printing
• Creative and immersive products.

The West Midlands Tech Review 2026, authored by TechWM, which advises the West Midlands Combined Authority on technology strategy and runs Birmingham Tech Week, also noted cyber, data architecture and automation as leading segments.

The Midlands is strongly associated with transport, mobility and logistics and has broad and deep supply chains and technology development and test facilities in these segments, but the other sectors and segments are certainly growing in prominence and strength.

4. Emerging segments

Technology segments that perhaps do not feature as strongly as they should in published public sector plans are cyber security and emerging technologies that are still being developed in the region’s universities and labs.

Given the region’s strength in advanced engineering and manufacturing, there is increasing recognition of the opportunity for the Midlands to take the lead in a new generation of operational technology, including applied AI. Digital technology sensors and controllers for manufacturing and production lines, warehouses and machinery present multiple challenges, including in relation to digital security.

The region’s other partially hidden strength is its diverse population and extremely rich clinical data. There is some evidence of HealthTech businesses from outside the region, and from abroad, starting to locate in the region for this, but we should expect the flow of inbound businesses to increase.

The opening of the first phase of Birmingham HealthTech Innovation Campus within the last 18 months, and the huge planned HealthTech-focused development at Arden Cross, provide vital locations for newcomers, alongside the existing NIHR Biomedical Research Centres – a number of which are located in the Midlands region.

5. Funding for technology businesses

The golden years of grant funding for technology are over for the time being, but there are significant opportunities available.

For start-up businesses, the grant-funding landscape is strong, led particularly, but not exclusively, by UKRI, as well as some sector-specific organisations offering funding, including a number of regional and sector-specific funds that are now active.

Local Innovation Partnerships Funds announced in 2026 are among the largest funds aimed at technology businesses, but they are narrowly focused and are based on a triple-helix model involving private, public and academic sectors.

In the West Midlands, the programme is now open for advanced manufacturing (FORGE/University of Warwick), HealthTech (WM Clinical Trials Catalyst/University of Birmingham) and digital-creative industries (Creative Industries Scale-up Lab/University of Warwick). The East Midlands offers the East Midlands Investment Zone, a 10-year programme focused on advanced manufacturing and clean energy.

The concern that is increasingly voiced is that the proportion of technology businesses that fail when the grant funding runs out is too high in this region. NatWest identified 1,743 innovative businesses in the West Midlands, including 838 public-grant recipients, but found that 47.4% of grant-backed businesses remained active without appearing to generate revenue. Around 15% of grant-backed businesses in the region gain investment, compared with around 26% nationally.

Why? It may be because we do not have the right timely support measures in place for our young technology businesses in the Midlands, as outlined above. But at the same time, grant funders are likely to take more care and offer funding on ever-tighter terms and conditions.

A common complaint about funding in the Midlands is that businesses have to go to Manchester or London for early-stage capital. There is still an element of truth in that, but it was clear during Birmingham Tech Week this year that the funding environment is changing.

Some venture capital funders are now present in Birmingham, for example BGF, Mercia and Future Planet Capital, and for earlier-stage businesses there are now at least two networks of angel investors in the region. The picture is improving.

6. Skills and talent

The big news in the Midlands region is the impact of AI on digital technology development. GenAI tools are completely revolutionising the software development process and are having a huge impact on other areas of technology development too.

Our research for this article indicates that there may be a regional shortage of talent in the fields of software engineering, AI and data analysis, cyber security, cloud infrastructure, DevOps, automation and technical support. However, it is likely that the demand is for relatively experienced staff who can deploy AI or use it to augment and support their existing expertise.

The market for junior engineers and developers is likely to be thin. This is not peculiar to the Midlands region: the impact is national and international, and across sectors. Commentary during the various recent tech weeks in the region recognised the problem and the related risk of failing to preserve a pipeline of experts in disciplines in which AI is becoming competent. Solutions were in shorter supply.

The risk is therefore not a shortage of graduates in technical disciplines. It is a shortage of commercially experienced product managers, sector specialists, implementation leaders and scale-up/commercialisation specialists who can connect technology with real industrial and organisational problems and use AI to augment their organisations and their own in-role performance.

7. Visible risks and constraints

The Midlands has no shortage of technologies, founders, research assets and industrial customers. Its central challenge is converting those assets into larger, investable and internationally competitive businesses.

There is potentially a systemic failure to provide the support needed for early-stage technology-based businesses to convert grant-backed kick-starts into customers, recurring revenue, capital investment and exits.

Early-stage funding is available, but it is fragmented. Regional differences may reflect regional strengths, but the understandable focus has a freezing effect in some quarters. Some fields where the region has genuine existing or emerging strength are under-supported, and it is not clear that the region has sufficient agility to spot, turn and face businesses in these fields to support them.

Support, where available, is spread across public authorities, universities, clusters, incubators, accelerators, local networks and industry bodies. This creates substantial choice, but businesses can struggle to identify the right programme, backer, funding, test environment or customer.

The Midlands competes with London, Oxford and Cambridge for equity funding, talent and national and international attention. A base of regional funders is forming, but there is a risk that it will not continue to develop unless the systemic failures are addressed. If we want investors to come, we need to fix the pipeline of investable businesses for them.