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Watch out Silicon Valley - is London closing in?

The U.K.'s tech scene is snapping at the heels of its stateside counterparts, growing faster – and employing more people - than its Californian rival, according to a new report.

As the first London Technology Week gets underway, the research bolsters London's case to become a key global digital hub.

Some 744,000 technology and information workers are employed across London and the U.K.'s east and southeast regions (including Oxford and Cambridge), according to a report by South Mountain Economics' Michael Mandel, published Monday. This figure has shot up by 76,000 since 2009.

Old Street roundabout, in the area known as London's Tech City
Chris Ratcliffe | Bloomberg | Getty Images
Old Street roundabout, in the area known as London's Tech City

This is larger than California's infamous tech sector, which employs 692,000, South Mountain Economics found. And even taking into account the rapid growth of San Francisco's digital scene, the sector in London and its surrounding areas is expanding faster than its Californian rival, according to the research.

To keep ahead of the game, however, London has some significant hurdles to overcome, according to a survey of fast-growing businesses published by Tech London Advocates last month.

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The biggest impediment to the capital's digital future is a shortage of talent, according to 43 percent of those questioned. While some 10 percent highlighted issues with the U.K.'s immigration legislation.

Joanna Shields, chair of Tech City UK, told CNBC that the issues holding London back were not unique.

"Our challenges are the same as New York's, they're the same as San Francisco's. When you're building a robust digital and internet economy, you need more talent, and you have to make sure skills keep up with the pace of technology," she told CNBC at London Technology Week.

"Each urban center of tech is experiencing the same issues. So yes, we can learn from New York and San Francisco, but they can learn from us."

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Shields highlighted that one way Britain was working to overcome these challenges was by introducing things like the "Exceptional Talent" visa for international leaders in science, engineering and tech.

"We (Tech City UK) are trying to look at this case by case and to help companies… get those visas," she said.

Economic boost

Taken alone, London's tech sector employs only slightly fewer workers than those in New York and San Francisco/Silicon Valley, according to South Mountain Economics.

London has around 382,000 workers in the sector, just below San Francisco/Silicon Valley's 397,000 and New York's 411,000. Nonetheless, report author Mandel said the figures places "the city within the top echelon of global tech regions today."

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Separate research by Oxford Economics, also published Monday, found that London's digital tech sector is expected to grow at a rate of 5.1 percent per year.

This will boost Britain's gross domestic product by £12 billion ($20.37 billion) over the next decade, according to the report, creating 46,000 new jobs in the capital.

Speaking at the launch of London Technology Week, Mayor of London, Boris Johnson, said these forecasts were realistic. However, he stressed it was time to question why London – as Europe's biggest digital hub - hadn't yet produced a tech giant like Twitter, Google or Facebook.

"Is it because of a British diffidence about making billions of pounds? Is it because we don't have the right kind of kick-ass business people here in London? Is it that the banks and venture capitalist industry aren't as imaginative and proactive as they could be?" he asked.

Johnson denied that "all the big ideas" had already been taken by companies like Twitter, Facebook and Google. "I don't believe that to be the case. This is just the beginning of an industrial revolution in which London has a huge chance of being the center," he added.

—By CNBC's Katrina Bishop

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