London Technology Week puts the spotlight on tech in the capital
by Inline Policy on 20 Jun 2014
The inaugural London Technology Week comes to a close today. Featuring over 200 events, the week-long showcase has shone a light on many of the innovative companies who are thriving in London. More broadly it has underlined the growing sense that London is fast becoming one of the leading tech centres in the world. Former Mayor of New York, Michael Bloomberg, who joined London Mayor Boris Johnson in launching the event on Monday, went as far as declaring that London is now a real challenger to Silicon Valley. Beyond the fanfare, an important thread of this week has also been the growing discussion about the challenges which need to be addressed if London is to truly cement its place as a global tech leader.
So what does the data tell us about the state of tech in London?
To coincide with the launch of London Technology Week, the findings of Oxford Economics research commissioned by London & Partners, were published. This research found that London’s tech economy could grow by more than £12 billion over the next decade, with more than 40,000 new jobs created as a result. A separate study entitled London: Digital City on the Rise, commissioned by Bloomberg Philanthropies, and with economic analysis performed by Dr. Michael Mandel of South Mountain Economics and Dr. Jonathan Liebenau of the London School of Economics, also had a number of key findings. These include:
- The growth of London's tech/info sector from 2009 to 2013 was more than triple the previous four years.
- London's share of the combined US-UK tech/info sector has been rising over time, from 5.8 percent in 2000 to 6.8 percent in 2013.
- London is a major hub for big data. There are an estimated 54,000 big data workers within 25 miles of London, compared to 57,000 for New York City and 98,000 for San Francisco-Silicon Valley.
- London is the world leader in financial technology (fintech). There are an estimated 44,000 fintech workers within 25 miles of London, compared to 43,000 for New York and only 11,000 for San Francisco-Silicon Valley.
- London's expanded tech/info sector—a broader measure that includes tech, information, professional, and scientific industries—has increased by 15 percent since 2009, compared to an increase of only 8 percent for the rest of the London economy.
- Overall, the expanded tech/info sector has accounted for 30 percent of total London job gains since 2009.
As always, such statistics are open to scrutiny with some commentators arguing that the definition of a tech firm in such studies is far too broad. Sky News’ Technology Correspondent Tom Cheshire, for example, cast a particularly cynical eye over the numbers in his column.
Whilst the validity of statistics are always open to question, it is undoubtedly true that London has become a focus for tech investment and growth. Home grown start-ups sit alongside international start-ups who choose to base themselves in London. Klarna, the Swedish online payments firm, for example this week confirmed its UK launch with London as its base and outlined plans to invest more than £100 million in product development and roll-out. This is all complemented by investment from established global tech leaders.
We are also seeing growing investment from universities in London tech, which is a welcome development. King’s College London and the University of Warwick, in partnership with New York University, for example intend to establish a Centre for Urban Science and Progress in London, based at Canada Water from 2018.
London certainly has many of the necessary attributes in place to become a tech leader. Boston Consulting Group (BCG), who also released research into London’s tech scene this week, identified five key ingredients which help to explain the city’s success. These ingredients, identified through interviews with more than 30 technology executives and other stakeholders in the city, were as follows:
- A strong talent pipeline, of executives as well as engineers and programmers, from universities and external markets
- A vibrant tech community with mentoring, networking and visibility
- Availability of local capital from early funding through to rapid growth stage
- Robust and flexible infrastructure such as broadband and office space
- Coordinated government support
These factors, allied with close proximity to significant markets in sectors such as Financial Services and the Creative Industries, present a considerable opportunity for further growth of tech in London and in the UK more broadly.
We are already seeing London excel in areas such as FinTech where companies such as TransferWise are raising significant funds from investors. We are also seeing partnerships develop between mainstream banks and peer-to-peer lenders. Just this week Santander announced a partnership with Funding Circle, the first time a high street bank has offered crowd funding support to small businesses.
As the BCG report highlights, a particular strength of London is its ‘vibrant tech community with mentoring, networking and visibility’. In recent years there has been a significant growth in the number of tech incubators which provide start-ups with mentoring, support and practical guidance about how to scale up their business. Canary Wharf for example is host to Level39 which is Europe’s largest FinTech accelerator space and Startupbootcamp Fintech is another leading incubator in London.
Alongside the growing number of incubators, there are also a variety of advocacy groups emerging such as London Tech Advocates which is a private sector led coalition of expert individuals from the tech sector and broader community who have committed to championing London’s potential as a tech leader. These initiatives are central to nurturing existing businesses and inspiring the next generation of tech entrepreneurs.
On top of all this, there is the fact that the UK is ideally placed in terms of geography and time zone to attract international tech businesses to operate in London. Supportive government policies such as tax incentives such as the Seed Enterprise Investment Scheme (SEIS), which provides tax relief for investments in qualifying start-ups, also play a role in building a supportive environment for investment and growth.
Whilst it would be easy to get carried away with all the positive statistics, it is clear that there are a number of issues for policy makers and industry to address if London is to truly become a global tech powerhouse. These are true for the UK tech industry as a whole. A number of these issues were also highlighted in the BCG report, which argued that London’s technology industry needs more engineers, better access to venture capital and faster Internet access to support continued growth.
Arguably the most frequent issue which is put forward by tech businesses in London and elsewhere is having access to a skilled pool of talent. This was explored by David Richards, co-founder and chief executive of WANdisco, who argued this week in City A.M that whilst moves to introduce coding into schools are welcome, more needs to be done at universities, which in his view are failing to teach the skills needed. Richards went on to conclude that unless there is a “broader attempt to address the UK’s skills shortage, British tech will come unstuck. Fail to deliver on this and the thousands of tech firms starting up will inevitably look elsewhere to scale up.” Another issue which continues to be of concern to many tech businesses in London is current immigration policy which can make it harder for companies to attract the best talent. This was explored by Russ Shaw, founder and chair of Tech London Advocates, in a recent column.
Another major question is how can the numerous emerging tech companies in London scale-up? The transition from start-up, to SME to global player is a frequently discussed one. Boris Johnson, raised this in his inimitable style this week when he said that “although we've got the biggest tech sector in Europe we haven't yet produced knock-out multibillion pound companies. They have in Silicon Valley. We need to explore why that is. Is it a certain British diffidence about making billions? Is it that we haven't got kick ass business people here?”.
Driving scale is a difficult challenge, but ultimately if we can get all the right levers in place such as – a skilled labour force, access to capital, a supportive regulatory environment, and access to world class infrastructure – then scale will hopefully come. Ultimately this will be determined by the extent to which tech companies in London are able to exploit domestic and international markets.
Forget the Silicon Valley comparisons
As ever, the question about whether or not London can compete with Silicon Valley, or what needs to be done to make London a genuine rival to Silicon Valley, has become a thread of the media discourse this week. This discussion can become a distraction and the simple fact is that Silicon Valley will always be different from London and has its own unique characteristics. Kit Malthouse, the Deputy Mayor for Business and Enterprise, made this point his week when he said “We’re not trying to compete with Silicon Valley. We want to add value to what’s going here in London.” This is the right approach. London (and the UK more broadly) should focus on playing to its strengths, rather than seeking to replicate what is happening elsewhere.
London Technology Week is undoubtedly a welcome development. It has brought attention to tech in London, showcased exciting new companies and shone a light on some of the issues which are holding back growth of tech in the capital. All the necessary building blocks are in place for London, the imperative now is ensuring that they are built upon.
(Photo by Ms Sara Kelly/CC BY)
Topics: UK politics, Financial Services Regulation, UK business