The Prime Minister’s championing of Silicon Roundabout has meant that this area of east London continues to be seen as the place to be for any self-respecting technology business start-up. But there are downsides to promoting one area in this way: not least, the demand it prompts will drive up prices.
In the Silicon Roundabout area, the number of new companies opening has actually fallen in each of the past two years, chiefly because it is now too expensive to rent there. In the 2014-15 financial year, according to the accountant UHY Hacker Young, 10,280 companies registered to begin trading in the area – a third down on the previous year’s total of 15,620.
“Silicon Roundabout has almost become a victim of its own success,” says Colin Jones, a partner at the firm. “By attracting larger firms into the area [Cisco and Amazon now have local offices], rents increase, available space decreases and the smaller start-ups that were initially attracted to the area are forced out.”
If you believe that businesses are more likely to thrive if they are surrounded by like-minded entrepreneurs and have easy access to support structures, it’s a problem if the next generation is unable to join the club.
On the other hand, the hype around Silicon Roundabout was always excessive – there are plenty of other centres that are quietly getting on with nurturing start-up businesses without the distraction of prime ministerial visits.
In fact, the success of Silicon Roundabout may lead to new communities of this type springing up. Mr Jones points out that the number of new company registrations has leapt up in surrounding areas including Islington, Borough and Bermondsey.
There are other entrepreneurial clusters all over the country worthy of support. These include the well-known groups of businesses that have sprung up around Cambridge and Oxford universities. The former in particular has a better record of spawning start-ups that eventually become national and international giants. Think of ARM or Autonomy, for example.
But in addition, there are many less trumpeted clusters doing great work. A report earlier this year from Tech Nation, the technology specialist, found that the fastest growing clusters are actually hundreds of miles away from the capital. Tech Nation pointed, for example, to Bournemouth, where the number of local technology businesses in its enterprise cluster grew by 212 per cent last year. In Liverpool, the equivalent growth rate was 119 per cent.
There is no shortage of other examples of successful start-up clusters, though the headline numbers aren’t always quite so impressive. The Bath and Bristol area, for example, is boasting large numbers of start-ups. Brighton, down the road from fast-growing Bournemouth, is another area of excellence. Cardiff is home to a remarkable number of start-ups.
It’s good news that the scene is more geographically diverse than you might imagine, but these areas have mostly grown without much public-sector support. Some have benefited from the vision of a far-sighted local authority, or been able to piggy-back on a successful university, but often firms have simply come together locally to promote enterprise in their areas.
With a helping hand, these clusters could be even bigger and better. And this is another important reason for diverting at least some attention and resource away from Tech City and the Silicon Roundabout – not only is the area no longer benefiting from all the noise, but amid the din, the case for other equally deserving clusters is not being heard.
Small companies surviving longer – but growth slows
Start-up businesses are surviving for longer, in greater numbers, and attracting more investment, research suggests, but the proportion delivering very high rates of growth continues to fall. The research, published by Barclays Bank and the Business Growth Fund, suggested that small businesses’ impact on the economy was growing.
The first half of the year saw a 3.9 per cent increase in the number of active companies, they said, the largest rise recorded since the two organisations began producing this study in 2012. The number of company dissolutions fell during the first half compared to the previous six-month period, the first such fall recorded.
The number of deals struck in which a company or a stake in a company changed hands for more than £200,000 rose 5 per cent. But Barclays and the BGF said only 20.8 per cent of small and medium-sized companies (those with a turnover between £2.5m and £100m) were experiencing high rates of growth, down from 21.5 per cent last year.
British firms suffer from ‘ambition gap’ – Goldman
Goldman Sachs has joined the campaign to persuade small and medium firms to begin or to expand their exporting activities. A report from the investment bank, published today, suggests more than 110,000 SMEs have the potential to begin selling overseas or to sell more: encouraging them to do so would add £1.15bn of value to the economy, Goldman said.
The report, published jointly with the British Business Bank, the Enterprise Research Centre, the Scale-Up Institute and the Saïd Business School at Oxford University, argues that while SMEs generate 20 per cent of jobs growth in the UK, too few are exploiting innovation and internationalisation in order to boost productivity. It describes a “growth ambition gap” between SMEs in the UK and other G8 economies.
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