Pay for IT professionals in the North of England is growing four times faster than pay in the South, according to an analysis by Brookson, a leading provider of accountancy services to IT contractors.

IT professionals in the North of England (North West, Yorks & Humber and the North East) now earn on average just 12% less than their Southern counterparts, compared to 17% in 2009. Median pay for IT professionals in the North jumped by 4% over the past year, from £35,827 to £37,256, while pay in the South contracted by 0.3%, from £42,356 to £42,205.

Since the first full year of recession in 2009 pay for IT professionals in the North has risen by 13.1%, from £32,941 to £37,256, compared to 6.7% for IT professionals in the South (South West, South East, London and East of England), ​from £39,552 to £42,205.

Brookson says that pay for IT professionals in London and the South East tends to be heavily reliant on the health of the financial services sector, which was pegged back following the financial crisis as pay freezes were implemented, business volumes fell and banks re-structured.

Increase in pay for IT professionals by UK region, 2009-15

Pay for IT professionals in the North growing four times faster than the South

Martin Hesketh, Managing Director of Brookson, comments: “The dominance of the financial services sector in London and the South East, which took a battering during the crisis, has had a knock-on effect on pay for IT professionals. A large proportion of IT professionals in London and the surrounding counties are either directly engaged by banks, or work in consultancies whose customers are in the financial sector.”

“While the tech sector in London has boomed, including fintech, pay for IT professionals in these start-ups tends to be significantly lower than large corporates, and a large component of total compensation consists of share options rather than cash.”

He adds: “The growth of the digital economy has been quite evenly spread geographically. Although London dominates, regional cities such as Newcastle and Sunderland in the North East, and Cardiff and Swansea in South Wales, have emerged as regional tech clusters, pushing up demand for IT skills.”

IT professionals in the North East see highest pay rises since financial crisis

According to the research by Brookson, pay for IT professionals based in the North East has risen fastest over the past year, by 6.4%, from £35,504 to £37,767, which is over nine times faster than London, where pay rose by just 0.7%, from £46,613 to £46,939. IT professionals in the North East are now the highest paid in England outside London and the South East. In 2009, IT workers in the North East were the lowest paid in the country.

Martin Hesketh says: “Newcastle and Sunderland are the twin focal points of a dynamic tech cluster in the North East. The surge in start-ups has rapidly drained the local talent pool, which has pushed up pay, taking the North East from the lowest paid region for tech skills in the country to one of the highest.”

“The North East has a much lower cost base than many other regions, which makes it ideal for start-ups. Tech businesses in the North East have the advantage of being able to spend more on developing their products or services, compared to start-ups in other regions who might have higher staffing and property costs.”

He adds: “The concern for tech businesses in the North East is that staffing costs are now comparatively expensive. Unless the region can draw in talent from elsewhere, or nurture its own talent, its cost advantage will be eroded.”

IT contractors earning more than double the amount of IT employees

According to Brookson, IT contractors on average earn more than double their fulltime counterparts. Brookson analysed rates for 200 IT contractors across the UK and found that average annual gross pay was £91,520 compared to the UK average of £40,051 for fulltime employees.
Brookson points out, however, that IT contractors who operate through their own companies tend to be more experienced and/or have higher value skills. They also pay less tax than fulltime equivalents, which means that their take-home pay is a higher proportion of their gross income.