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3 August 2012 0 Comments
Posted in Opinion, Technology & media

Highlights from “A tale of Tech City: The future of Inner East London’s Digital Economy”

Posted by , Partner

This 134 page report was written by Max Nathan, Emma Vandore and Rob Whitehead at the Centre for London, which is a politically independent, not for profit think tank focused on big policy changes for London. There are six sections to the report: introduction, cities and the digital economy, understanding the cluster, views from inner East London firms, future scenarios and conclusions/recommendations.

There is a short background to the development of Tech City – which is based on the Silicon Valley model. Inner East London has a vibrant cluster of small and medium sized digital businesses – with over 3,200 firms (almost 1,600 in three core wards) and 48,000 jobs in the area in 2010 and the report sets out a plan for its future development which is led by London & Partners, Tech City Investment Organisation (TCIO) and the London Legacy Development Corporation.

The entrepreneurs interviewed were mainly white, male and educated – mostly in their 30s – generally running micro-businesses (under 10 staff) that were less than five years old. Over a third of all firms had an international structure of some kind.

The area benefits from cheap rents, access to the rest of London, proximity to like-minded firms, amenities and “vibe” thus attracting the “cool, creative, tech-savvy young urbanites” that digital businesses want to attract and retain.

Seven areas of concern were identified:

  1. Skills gaps – There is a lack of skilled developers and specialist staff
  2. Access to finance – An apparent lack of understanding of the digital sector amongst financiers
  3. Workspace, access and cost – Rising rents are starting to push start ups out
  4. Connectivity – A third of those interviews said this was a constraint to business
  5. Mentoring and management skills – Trouble accessing this advice in the neighbourhood
  6. Business development – Existing entrepreneurs are better at having ideas than converting start ups into mature, global businesses
  7. Tech City Strategy – Worries about the three pronged approach and suggestions to spread into the Olympic Park

Four possible future scenarios were developed:

  1. Go East – with larger firms moving to new sites further east in the Olympic Park creating a new digital hot spot
  2. Upgrade – Continues to add jobs and firms in current location
  3. Corporate takeover – Large firms in finance and non digital businesses dominate and the digital cluster disperses
  4. Decline

The report explores how similar clusters have developed in Silicon Valley, Berlin, Paris, New York, Israel, Malaysia and Chile to see what policies and interventions have been most effective. A whole host of studies from academic institutions and leading consultants are also reviewed as well as research from the actual Tech City companies.

Recommendations:

The report offers a series of recommendations to support the growth of the Tech City hub:

Strategy

  1. Clarify objectives and support digital economy SMEs and new entrepreneurs in the existing cluster
  2. TCIO inward investment activities focused on attracting complementary investments
  3. Agencies to temper efforts to attract digital employers and workers to Olympic Park where it detracts from primary aim of helping SMEs and nurturing entrepreneurs

Recruitment

  1. Government speeds up tier 2 immigration processing
  2. TCIO develops role as “immigration intermediary” for London SMEs
  3. Reinstate two year post study work visa for post-graduates in STEM (science, technology, engineering, and mathematics) subjects
  4. Expand relevant recruitment fairs
  5. Local training providers evaluate Tech City Apprenticeships

Entrepreneurship

  1. TCIO to expand the annual Entrepreneurs’ Festival
  2. TCIO monitor take up of Entrepreneur Visa in London and consider a UK version of Start Up Chile

Access to finance

  1. Physical relocation of angels and capital venture firms (e.g. finance desks in shared workspaces)
  2. Banks to develop specialist digital economy offerings
  3. Expand existing online and physical networks
  4. Government to develop a second digital focused Enterprise Capital Fund
  5. Government to develop a clear legal framework for equity crowd-funding

Connectivity

  1. ISPs to guarantee a two week connection time
  2. Workspace providers to integrate broadband into rental packages
  3. Monitor connectivity so there is a rich network

Workspace

  1. Local authorities to ensure Local Plans encourage affordable workspace
  2. Explore potential for converting empty buildings
  3. Encourage affordable workspace – which could involved modifying the Business Increase Bonus

Mentoring and management advice

  1. Develop mentoring activities and meet ups
  2. TCIO should provide support for building its Mentorship Programme

Governance

  1. TCIO to become quasi-independent agency with own budget
  2. TCIO to expand role to help SMEs with key issues
  3. Number 10 and GLA to assess effectiveness of Tech City policies
  4. Monitor developments in New York and develop links with policy makers there

Royds solicitors is committed to supporting SMEs and entrepreneurs in Tech City. We have a number of fixed price services making access to the required legal advice from lawyers who are experienced in the technology sector accessible and have senior, commercially minded lawyers who can provide mentoring services. Please contact John North on jdn@royds.com or Claus Andersen cka@royds.com

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