This is one of the 16 market profiles produced as part of the Economic Market’s foresight study commissioned by the North East LEP. It provides an overview of the future growth prospects for the immersive technologies market globally, a summary of the enterprise base serving the market in the North East and relevant regional assets, and an analysis of how the continued convergence of global trends will affect future market development.
These markets were selected as those most likely to present opportunities for future regional growth in the North East LEP. This was done based on a trends analysis conducted by Frost and Sullivan, which identified 37 high impact trends driving continued change and growth in these markets globally. A shortlist of markets from this trends analysis was then cross-referenced against the current North East position by Cambridge Econometrics. This analysis identified the most significant opportunities for the North East LEP.
Each of these profiles also uses findings from the Data City platform to quantify the number of firms serving the immersive technologie market in the North East. This platform links companies house data to companies’ websites and uses the website text and machine learning to classify firms into Real Time Industrial Classification Codes, which can allow analysis of markets often too emergent to be precisely measured in SIC codes. The data from this platform has been triangulated against ONS data to consider a variety of perspectives on the market.
More detail about the methodology can be found here for the 16 market profiles.
Emergent status
in the North East and associated value chain
International scope
in terms of firm activities and ownership
Moderate presence
a similar number of firms in this market with locations in the North East to the national average
Description and global outlook
Immersion in the simulation of an alternative environment
Immersive technology has transformed the digital experience by bringing together the virtual with users’ sight, sound, and even touch. Recent developments in immersive technologies have created new opportunities for businesses to use virtual reality (VR), augmented reality (AR), mixed reality (MR), haptics and more, to solve problems, seize new opportunities, and push innovation forward.
Immersive technologies come in three main categories, based on the extent and application of the immersive experience involved:
Virtual reality (VR)
Virtual reality replaces a user’s surroundings with a digital environment using a head-mounted display (HMD), one display for each eye. The HMD has a motion sensor to track head movements, creating a seamless visual experience.
VR is often also supplemented with audio to add sound to the experience and immerse the user even more. With VR headsets and VR-compatible consoles becoming more accessible, the video game industry has taken advantage of immersive technology to bring innovative experiences to users.
VR has also been used for a range of workforce training purposes e.g. health and safety training.
Augmented reality (AR)
Augmented reality (AR)creates an immersive experience for users by fusing reality with the virtual.
Using a digital device, such as a smartphone with a camera, users are able to see, hear, and/or interact with virtual assets in real time. This technology is made possible by computer vision algorithms, which let devices ‘see’ the physical world through depth tracking, localisation and mapping; the device can then place the virtual assets in a realistic, immersive way.
AR has many applications, from highly specialised fields, to everyday ‘fun’ uses.
Mixed reality (MR)
Mixed reality (MR)comes in many variations, and is usually visualised as a ‘spectrum’ between AR and VR.
Like AR, mixed reality relies on computer vision technology to accurately place the digital elements according to the user’s environment, while also creating a sense of ‘presence’ for the user as with VR systems. MR devices such as HoloLens, a holographic computer worn like a headset, allow users to place virtual items in physical spaces, manipulating and interacting with them without the need for smartphone screens.
The combination of real and digital, along with the ability to seamlessly interact with virtual elements, makes this an important development for entertainment industries like film and video-games who seek to bring more interactivity to their audiences.
Market drivers
The continued development of immersive technologies has already had an impact on the economy and has potential in many industries, as it offers new ways of interacting, analysing, and creating. Here are a few examples of why immersive experiences and technologies have been applied to existing processes to date:
Scale and scope of global market
In terms of revenue, the global immersive technologies market was valued at US$ 81.82 Bn in 2020, and is expected to cross US$ 2.6 trillion by 2031. The automotive industry is one of the largest contributors of investments in the immersive technologies market. Since VR is still in its nascent stage, these technologies are as affordable as never before and present great potential for adoption in the automotive industry. The AR head-up display (HUD) is an advanced driver assistance system projecting real-time information to help a driver stay more focused. The data is displayed on the windshield and usually consists of warning signals, navigation, speed, and engine status.
Though many car manufacturers are implementing AR HUDs in automobiles, the full potential of this technology is yet to be unleashed. Stakeholders in the immersive technologies market are witnessing potential in this sector and increasing their research in AR technologies. Hyundai in cooperation with WayRay has unveiled the world’s first Holographic AR Navigation System
Key players operating in the global immersive technologies market include EON Reality, Inc., HCL Technologies Limited, The Samsung Group, Oculus (Facebook Technologies, LLC.), Immersive Technologies Pty Limited, AVEVA Group PLC, CM Labs Simulations Inc., Lockheed Martin Corporation, Unity Software Inc., Barco NV, Blippar Ltd., Google, LLC, Honeywell International, Inc., and Magic Leap, Inc.
Capital flows and FDI
Funding for ICT and Data ventures (VC and PE-based) rose by 183% between 2019 and 2020. This is expected to be higher in 2021, partly as a result of the COVID pandemic, but also buoyed by the increasing numbers of innovative startups and growth companies in the market across the UK. This represented 42.6% of all VC and PE investments made across the nation over the period.
As with other markets, the regional breakdown of this capital liquidity does not favour the North East, with an aggregated 1.1% of all investments made in the North East region. There appears to be significant regional differences in either availability of private capital, or the readiness of regionalised ventures to attract such investment.
Further exploration into the barriers to private capital flows into the region, and how public-sector initiatives can support the crowding-in of such capital, is underway.
North East presence and capabilities
Regional overview
The North East region has the 2nd fastest (to London) growing IT and Digital sector in UK1, comprising 28,000 IT and digital employees, 51,000 students in STEM subjects across region’s 5 universities and 50 specialist gaming companies, and is also the location for the Sage HQ – FTSE 100 listed company. The North East has established strengths in software development, programming, service centres and gaming. There is a rapidly growing North East FinTech sector, MedTech, GovTech, Connected Construction expertise; and AI / VR / Augmented Reality technical expertise.
The region contains a cluster of international firms from the digital and advanced manufacturing sectors. As a test bed location, companies here can work with a nationally significant and collaborative advanced manufacturing base to develop immersive technology products. Immersive tech businesses, headquartered in the region, and operating on a global scale, include ZeroLight, Dimension, hedgehog lab, Coatsink and VRAI.
The region contains a cluster of international firms from the digital and advanced manufacturing sectors. As a test bed location, companies here can work with a nationally significant and collaborative advanced manufacturing base to develop immersive technology products. Immersive tech businesses, headquartered in the region, and operating on a global scale, include ZeroLight, Dimension, hedgehog lab, Coatsink and VRAI.
Numerous networks help influence, and connect businesses to suppliers and customers, such as Immerse UK and The Digital Catapult North East Tees Valley, SunderlandSoftwareCity, Digital City, Digital Union, Dynamo, VRTGO Labs/Proto Lab, and Thinking Digital. PROTO, a dedicated centre for emerging technology, provides businesses with access to a state-of-the-art research and development facility and North East Satellite Applications Centre of Excellence is based in NETPark, County Durham.
The 4 world class universities offer courses aimed at the immersive technology sector and include specialisms such as Computing at Durham University, Northumbria University’s BIM Academy, and the Faculty of Computer Science at the University of Sunderland.
The North East LEP area also has a rapidly developing data centre and connectivity role. Stellium Data Centres is the UK’s only cable landing station for the new North Sea Connect cable and the UK’s newest Internet Exchange Point. Can transfer data at 30 terabits per second. The Stellium campus comprises 12 IT halls within three separate data centres of Tier 3 standard.
In relation to skills and capability, it has been a priority of the North East LEP to increase the enrolment in STEM qualifcations. Overall, the change in total graduates between 2014/15 and 2018/19 and who studied a STEM related subject has been roughly in line with the UK average (10%).
However, some subjects have experienced a much faster increase in graduates, most notably in computer science, where the number of graduates increased by over 40% in the space of four academic years, compared to 19% in the UK as a whole. Notable occupations at the three digit level that grew faster than England excluding London between 2015 and 2020 were: Information Technology and Telecommunications Professionals (grew by 39% in the North East compared to 19% in England excluding London) and Research and development managers (140% growth vs 27%).
In relation to digital skills, according to the North East LEP local skills report, 3.5% of employment in the area was in digital occupations, comprising 42,700 people - a smaller proportion than England as a whole (4.4%). However employment in these occupations has grown faster in the North East LEP area between 2015 and 2020 than nationally (Growth of 24% in the North East LEP area compared to 18% nationally).
Provision of digital skills have also been invested in at Sunderland College, with instalment of a 360-degree immersive visualisation ‘dome’ that will allow students to train in several virtual reality environments. More broadly, there are nine Further Education colleges, providing technical education and further learning opportunities. They work together in the region on industrial skills development through the Skills Advisory panel
Analysis of GVA and employment by SIC sectors
Figure 1 summarises the findings from socio-economic data and economic forecasts, presenting headline findings for the IT Services industry. This is the most relevant SIC classified industry for which Cambridge Econometrics forecasts are available. The IT Services industry employs 24,400 in the North East, with a similar share of regional employment to nationally. The sector is highly productive, and has experienced a steep increase in employment and GVA. The outlook is forecast for a further increase in jobs and GVA growth.
The Data City findings
The Data City provides company data based on an AI-driven taxonomy search of terms and content on company websites. This is then connected to companies house data for each company and allows an aggregate analysis for new industry and market definitions. The data captures the number of business branches in the North East LEP area, which means firms registered outside of the North East LEP but with branches in the area are captured in the data.
The Data City suggests there were 22 active firms in immersive tech in the North East LEP area in June 2022 – 2.0% of UK firms.
Location quotients
In terms of enterprise counts, the Data City intelligence suggested that Gateshead is a centre for immersive technology, with 7 enterprises located here and a location quotient for this market amongst the 30 highest in the UK. Newcastle and North Tyneside also had a higher concentration of these firms than the UK average. In contrast, the other four authorities in the North East LEP area had lower concentrations of immersive tech firms than the UK average.
Out of region locations
The Data City results suggest that the immersive tech sector in the North East LEP is relatively self-contained. Of the 22 enterprises with a presence in the North East LEP only 23% had additional locations outside of the wider North East region. This is comparable the immersive tech sector overall, only 18% of UK firms had locations in more than one region.
14% of North East immersive tech firms had an additional location in London, but this was not a large proportion compared to the overall number of immersive tech firm in the capital. The North East did have two firms with an additional location in Scotland, which was a higher proportion of the total firms than the UK overall.
Sector crossover
One of the innovative features of the Data City methodology is that it allows firms to be classified in multiple sectors. The platform does so through real time industry classifications (RTICs), which are constantly evolving classifications generated by an AI from companies’ websites. Firms can be classified under multiple RTICs at any one time.
This means the data can be used to demonstrate interdependencies where sectors overlap. In terms of the North East LEP immersive tech sector, the largest overlap was with advanced manufacturing followed by digital creative industries. Compared to the sector nationally, the immersive tech sector in the North East LEP had a stronger degree of overlap with advanced manufacturing, digital creative, gaming and especially the streaming economy. This suggests there may be greater interaction between these sectors in the North East LEP than elsewhere.
Overall, in the UK immersive tech firms operated in 37 additional sectors, of which 13 were operated in by North East immersive tech firms.
Subsectors
The Data City methodology also includes individual subsectors within the RTIC taxonomy which allows detailed analysis of the North East LEP’s focus within the immersive tech sector. These subsectors show that the North East LEP has a stronger focus on augmented reality than the immersive tech sector in the UK. 55% of North East LEP immersive tech enterprises were classified as operating in augmented reality compared to just 37% of UK immersive tech enterprises.
Locations map
As suggested by the location quotient immersive tech enterprises in the North East LEP area were clustered in Gateshead and to a lesser extent Newcastle and North Tyneside. There was a particular concentration on both sides of the River Tyne near PROTO Gateshead. PROTO is part of the North East Tees Valley Digital Catapult network and one of the first digital production facilities of its kind in Europe.
Regional prospects
A critical part of this study is to shortlist which emergent markets represent “hot prospects” for the North East economy in the future. Using the findings from the study, and the assessment framework below – Immersive Technology is rated as a market with -
Emergent status in the North East
International scope in terms of firm activities and ownership
Moderate presence in the North East, with 2.0% of all firms in this market having a North East LEP location (compared to 2% of firms in all markets)
Immersive digital technology is proving increasingly pervasive throughout both new, and traditional industries in the UK, which means there is a key growth opportunity for the North East in this market. It is also a sector where the North East has clear assets such as Proto in Gateshead which means the North East may have a competitive advantage relative to the rest of the UK.
The relationships and dependencies in the table below highlight the two key challenges for the region to realise the potential of this market. Firstly, on the dependencies, there is a strong dependency within immersive technologies on other digital markets covered in this study, including IoT, Software Development and Cybersecurity. The North East does have strengths in some of these areas also, but it will be important to build a broad sweep of digital capabilities to ensure that the Immersive technology market in the North East is not constrained by slower growth elsewhere.
The markets enabled by this technology then highlights the second challenge, to encourage adoption in related markets and drive demand. The table highlights that Telemedicine has strong potential enablement’s from Immersive tech, while a range of other markets across manufacturing and supply chains also have significant potential adoption opportunities. Much of this relies on how Immersive technology is a gateway for human-robot, or human-computer interfacing, which can lead to significant efficiencies in industries with high hazard, safety, or mission critical operations.
A focus therefore should be made on establishing how immersive technologies can support the growth of other regional markets, driving productivity in sectors with greater overall employment and GVA.
