Friday TechMunch: Five Years on What’s The Scorecard for Tech City?

In 2010 David Cameron said “our ambition is to bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make east London one of the world’s great technology centres.”

Almost five years on, how successful has the government been and what does this tell us about the efficacy of policy in stimulating entrepreneurship?

In a recent report by the Financial Times, Max Nathan, a senior research fellow at the NIESR, commented that “policy has certainly hugely raised awareness of the London tech scene.” But, beyond raising awareness, the impact of government policy is ambiguous. So, does the government deserve the credit it seems to expect?

Recent research from London Tech Advocates found that some 26% of the tech companies surveyed have considered relocating outside the city because of rent rises, while 47% say poor broadband is damaging the area’s reputation. The London Policy Unit at the Federation of Small Business has agreed that creative businesses are moving out of the city, leading to a loss of the natural ecosystem which is so vital to a vibrant tech community.

Some tech entrepreneurs also complain that it is only high-profile businesses with strong connections to those in power that have benefited. They claim that government is drawn to the names and brands that offer a reflected glow, not always the ones that have the greatest potential or impact.

While government tax breaks for investors in early-stage companies, via the Enterprise Investment Scheme (EIS) and the Seed EIS scheme, (which raised more than £80m in its first year) have undoubtedly helped, there is a lingering suspicion. Are policy makers more attracted to the good PR the tech industry brings, rather than making meaningful change that helps entrepreneurs?

Emily Thornberry, a Labour party MP whose constituency includes parts of the Silicon Roundabout area, thinks that fast broadband – one of the fundamental building blocks for tech companies – has been overlooked. Commenting in the FT, she said; “Tech City cannot be built simply on hyperbole. We cannot make Tech City one of the world’s great technology centres…when it takes nine hours to upload a 2.5 minute film.”

The acute shortage of skilled workers also continues to hold back the sector with restrictive visa regulations holding back the movement of talent that could help UK start-ups expand. Of the 200 visas Tech City UK could dole out to exceptionally talented entrepreneurs, only seven were distributed in the past year.

So what does the scorecard look like?

Tech City has certainly put the sector high on the radar of policy makers and raised the area in the public consciousness and it would be wrong to claims that this hasn’t translated into real impact. According to research by the London School of Economics and National Institute of Economic and Social Research, the number of digital jobs in the Tech City area climbed from 16,578 in 2012 to 18,679 in 2013.

But if the ultimate goal has been to attract tech start-ups and see them grow, other hubs in the UK have been more successful. Between 2010 and 2013, Bournemouth saw an increase of 212% in new digital businesses while its neighbour, Brighton, witnessed a 91% increase. In the North, Liverpool has seen an increase of 117% while Manchester has recorded a 70% boost. In the same period, inner London also increased its digital businesses by 92%.

Perhaps the lesson here is that the focus on the hipsters in Shoreditch has had just as positive an impact on other parts of the UK.

Skills and infrastructure (read ‘broadband’) remain the most important ways policy makers can support technology sector growth. Take care of this, the argument goes, and the entrepreneurs will take care of the rest, with or without the government.