Old Street station in London earned the nickname ‘Silicon Roundabout’ by hosting hundreds of promising tech startups nearby. Its tech sheen is enhanced by a large digital billboard sponsored by Google which overlooks London’s top tech talent as they walk to and from work. Not only does the billboard greet them as they pass, but it informs them of the temperature, and advises them on nearby restaurants.
But despite its startup-friendly reputation, Silicon Roundabout has stopped attracting new startups. In 2016, 3,070 new businesses were founded in the area. That’s a 70% decrease on 2015, which saw 10,280 startups founded, and an 80% decrease since 2014, which saw 15,620.
Clearly, Silicon Roundabout is not the hub of startup activity it once was, but what are the factors behind this decline?
- Shoreditch office prices are pricing out new startups
When Shoreditch was home to only 300 digital startups at the start of the decade, excited entrepreneurs were flocking east to found companies, and there was ample affordable space to accommodate them. In fact, low rental prices were one of the primary reasons the area grew in popularity (and earned its nickname). But the laws of supply and demand no longer work in favour of startups, and the once-affordable rents have skyrocketed.
In just seven years, Silicon Roundabout has officially become the most expensive tech hub in the world, outstripping even its notoriously pricey counterparts San Francisco and Brooklyn. As of 2018, rent per square foot in Shoreditch is £70, compared to San Francisco’s £59 and Brooklyn’s £43.
While established businesses like Vice and YouGov can afford to keep doing business in the area, prices like these are hugely discouraging to entrepreneurs looking to set up new businesses. As the figures reflect, fewer and fewer of them are even considering working in Shoreditch. Instead, they are heading to other cities around the country.
- Tech startups are looking elsewhere in the UK
With Silicon Valley rents going through the roof, entrepreneurs have no choice but to look elsewhere. A recent poll found that as Silicon Roundabout rents increased, tech industries in other UK cities have grown exponentially. Bournemouth & Poole grew by 212%, making it the country’s third biggest tech hub, trailing Bristol & Bath, which has an estimated 61,700 tech jobs.
These regional booms have led to increased demand for commercial buildings in these areas outside of London where, fortunately for entrepreneurs, rent is far more affordable. Companies like Landmark have noticed a “huge increase in demand for office space outside London in recent years, particularly among small businesses and tech startups”. To satisfy this growing demand, Landmark offer office space in Bristol at a much lower cost than its metropolitan equivalent.
These regional tech hotspots also boast industry specialisms. Edinburgh, for example, has become a top destination for fintech startups after the opening of an RBS-funded tech hub. Meanwhile, Manchester is fast-becoming a centre of IoT innovation, and Cambridge has become a prime location for AI and manufacturing startups.
Despite these more affordable national bright spots, some startups are setting their sights on destinations even further afield.
- Brexit is driving some startups overseas
In the wake of the Brexit vote in June 2016, a brightly-coloured van patrolled the streets of London with this message: “Dear startups, Keep calm and move to Berlin.” The van was a playful publicity stunt by a German political party, but the message played into widely-held fears within the London startup scene.
One of London’s key selling points, for investors and founders alike, has been its connection to the rest of Europe, giving businesses access to a vast pool of international tech talent, free to live and work within Britain’s borders. Brexit puts all of this at risk; foreign investors may pull their funding, regulations may curb business, and a talent shortage could lead to unfilled jobs.
These risks are driving many innovators to found their businesses in European tech hubs like Amsterdam, Dublin, Barcelona, and of course Berlin. These cities each boast many unique advantages, but their most alluring promise for all these startups fleeing Brexit Britain is the connections they maintain with the European talent pool, and the free trade they enjoy with the world’s largest single market.