Venture Capital

Mark wrote the following article for this week’s House Magazine on Tech City and its future:

The transformation from the mid-noughties of an unloved district around Old Street into a swinging Silicon Roundabout was a timely reminder of what can happen when enterprise is left to its own devices. It was the low rents of the City fringe that first began to attract a cluster of small technology firms – a process accelerated in the aftermath of 2008’s financial crisis. When shaken together, the creative influences of Shoreditch and Soho, the money men of Canary Wharf and the Square Mile, and the brains of London’s top university graduates and global workforce, transformed that small cluster into what is, today, Europe’s biggest hub for IT start-ups. London has once again proven itself to be the perfect canvas for the cross-pollination of new ideas, innovations, skills and resources.

As with any freshly-rooted phenomenon, however, Tech City remains vulnerable to change in the delicate ecosystem from which it grew. Thankfully it already has influential PR to attract government interest in its fate. The handwringing in the aftermath of 2008’s financial crisis about London’s overreliance on financial services, and anxiety over how we might ‘rebalance’ and diversify the capital’s economy, mean that government is desperately keen to see Silicon Roundabout succeed. Nevertheless there are questions hanging over its future. How will it now retain the low-cost office space so critical to start-ups as the increasing popularity of the area drives up rents? How will it continue to attract innovative, highly-skilled and competitively-priced labour when London’s housing costs are so high and immigration rules are tightening? How can it retain a competitive edge over rival tech clusters when London’s broadband infrastructure is still so creaky?

Alive to concerns that several of us local MPs have raised about IT skills shortages, government has introduced a Tech Nation Visa Scheme to attract talented tech entrepreneurs. But concerns remain about the availability of developers and we must ensure that Tier 2 visas for those with more general skills are opened up if the skills shortage continues. Fantastic work is being done in schools and universities to encourage students to code and open their eyes up to the employment opportunities in the tech sector, however that will only bear fruit in the next five to ten years. Employers need skilled labour now.

Shared work spaces, rented desks and incubator hubs are springing up across the city to cater for new businesses in need of cheap space. The Innovation Warehouse, for instance, brings together entrepreneurs, investors and the City of London Corporation to support early-stage tech firms, and the provision of low-cost space is becoming a requirement in a number of planning applications in the area. The housing nut is proving harder to crack, and the cost of living is now ranking as one of the key worries for Tech City employers who are finding it harder to attract good people to their businesses.

Perversely superfast broadband continues to be an enormous headache here in Central London. BT’s Openreach brand has a near monopoly on the lines leading from local telephone exchanges to individual buildings, which then must be leased by rival broadband providers. Arguably the time is ripe formally to split Openreach from BT and start sharing their mapping on precisely where superfast gaps exist so that other providers can assiduously target those areas currently not being catered for. To give them their due, Openreach have agreed to invest more heavily in inner London after a fierce cross-party lobbying campaign. They also have to contend with reluctance by TfL and local authorities to allow more roadworks to lay necessary cables. But rollout is simply not fast enough so no potential solution should be ruled out.

The financial technology sector alone is now generating £20 billion of GDP to the UK economy, directly employing 135 000 people. This is no new bubble – technology is a rich vein for an advanced economy like the UK’s to tap. The appointment at the Summer Budget of a Special Envoy for financial technology, and the launch of the Upscale programme to help start-ups grow, are just two of many targeted initiatives to keep the wheels of Tech City turning. The trick for the future is to ensure that the very fluidity and dynamism that first got the engine going is not snuffed out as the first wave of digital entrepreneurs mature and become part of the commercial establishment.