A quick jaunt around Silicon Roundabout the other week was enough to see this story coming over the horizon – that many start-ups can no longer afford to base themselves in this tech enclave.
Latest figures from City accountancy firm UHY Hacker Young show that the number of start-ups setting up around Silicon Roundabout has fallen by more than a third in the last year from 15,620 to 10,280. The UHY Hacker Young research suggests that companies are being priced out of the area by rising rents.
This, says the report, is the second year that this trend has been observed. Many start-ups are now being forced to look for other areas and whereas it might be easy to scoff at trends which encourage companies to huddle together like wet sheep on a mountainside, there is a point to these kind of groupings. Talent is available, support service companies which understand the sector also start up and a quasi-social structure gets established, supplying such things as the right coffee and food.
And it would be easy to agree with many start-ups who think that basing themselves out of London is the answer. But even the most successful start-ups who have shunned the City admit that it’s harder attracting talent. You can provide nice offices, cheaper housing and bohemian cafes all outside the capital, but what you will struggle to do is attract the right amount of talented people. The stars that will make, or break a start-up tend to congregate around te metropolis – it’s where it’s happening. Attracting them out into the colder hinterlands on the basis of cheaper rents, lower traffic density and a more polite population, ain’t going to swing it for budding tech billionaires. They see London as a hard boot camp, something to be endured on the way to fame and fortune.
And as UHY Hacker Young point out, despite the drop in numbers choosing the Silicon Roundabout area (which is covered by the EC1V postcode), it still happens to be the UK’s number one location for new business generation.
Partner at UHY Hacker Young Colin Jones puts forward his view: “Rising rents in the Silicon Roundabout area are causing many start-ups to choose other neighbouring areas of central London, such as City Road, as their first base.
“However, Silicon Roundabout is still at the forefront of national business creation, and it is still the epicentre of the UK’s technology industry, attracting both start-ups and larger firms to the area, such as Cisco and Amazon.
“Most of the new businesses will be smaller one-man bands such as individual programmers or media consultants, who are attracted to the area by the opportunities to collaborate with their neighbours.”
“Silicon Roundabout has almost become a victim of its own success. By attracting larger firms into the area, rents increase, available space decreases, and the smaller start-ups that were initially attracted to the area are forced out into neighbouring areas. That is exactly why we have seen the tech start-ups heading away from Old Street to the City Road area.
“Many high profile digital and online companies have chosen to base themselves in N1 with Lyst, the online luxury fashion retailer, and Decoded, the programming instruction firm for professionals, being just two examples.”
North of Silicon Roundabout, the City Road area which is covered by the N1 postcode, saw the fastest increase in the number of new businesses out of the UK’s top five locations for start-ups. It logged a 479% increase in the number of new companies, from 1,450 to 8,400 in the last year.