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Can London continue to drive tech growth?

29/04/2015

There has been a great deal of positive data about London's technology and IT market over the last 12 months, with the capital's Tech City development a particular bright spot. Taking advantage of government funding and international media attention, the area has attracted a host of new businesses to the capital

However, all this positivity does not necessarily mean that tech development in the area is a bed of roses. For instance, a survey from YouGov recently revealed that 70 per cent of tech managers found market conditions in London to be a barrier to growth. Property rents in the capital's IT mecca, Shoreditch, have increased by 46 per cent, with the vacancy rate also plummeting.

With the proportion of available offices down to a low of five per cent, its worst level since before the financial crisis, concerns abound that London's tech market could be beginning to reach a saturation point. About four in ten small to medium-sized enterprises have missed out on business because of expansion problems in the capital, while six in ten of the digital firms surveyed admitted they would benefit from having strong regional hubs.

While a Tech City spokesperson claimed not to recognise this picture of the market, describing rents as "competitive", it is clear that the UK's tech revolution needs to take place in the regions as well as the capital.

Cities such as Birmingham and Manchester have also got the potential to house innovative, job-creating firms - the former is home to 6,000 tech firms that put some £768 million into the local economy, while Manchester's IT scene is rapidly growing, in part thanks to the BBC's relocation to Salford.

But would such a change in the market be viable? How could companies access the same kind of talent available in London?

First of all, it's important to emphasize that tech hubs already exist outside of London - for instance, the Cambridge Science Park is known for producing innovative and important research. Secondly, experts and analysts have long made it clear that a more broad-based technology sector would benefit the British economy as a whole.

Collaboration between tech clusters will also be important, as different areas can share their specialisations - for instance, Dundee's industry is best-known for gaming, having incubated world-famous designer Rockstar, while Manchester's greatest focus is on digital media and Swansea has a large number of developers working on technological health solutions.

Wouter Schuitemaker, investment director for Business Birmingham, highlighted the "huge untapped digital potential" outside of the capital in response to YouGov's survey. His claims are backed up by a recent Tech Monitor UK report from KMPG and Markit, which suggested that employment growth in this sector has far out-paced the expansion of other UK industries over the last quarter.

The Tech Monitor report also found that the ten areas with the greatest concentration of tech clusters were all in the south-east, suggesting businesses may need to think outside the box if they want to escape the problems facing London start-ups.

Tech City is a crucial part of the UK's technology industry, but by collaborating with other areas to reach affordable office space and new bubbles of talent the sector can enjoy broader-based, more holistic growth.

 

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