Many of our best prospects for success are being created outside the capital
The area around Old Street in east London can feel like another planet. Its inhabitants — start-up founders, venture capital investors and, increasingly, management consultants — rarely leave the coffee shops and shared workspaces of “Silicon Roundabout”. Venturing outside London is like intergalactic travel.
This is understandable. East London Tech City, to give the district another of its promotional nicknames, is by some measures the third-largest technology cluster in the world after Silicon Valley and New York. Successive governments have invested heavily to create a thriving ecosystem. The money is here, the people are here. Why go anywhere else?
The answer, as every Dick Whittington fan knows, is that the streets of London are not always paved with gold — and many of Britain’s most exciting businesses are based outside the capital.
“Not all the talented people in the world live in London,” said Stephen Welton, chief executive of the high street bank-owned Business Growth Fund (BGF), which backs fast-growing companies. “There’s a lot of entrepreneurial people across the country who have been ignored for a long time.”
Take Bristol’s Ultrahaptics, which I visited on a recent trip to “Silicon Gorge”. Inspired by founder Tom Carter, Ultrahaptics is developing technology that allows users to experience sensory feelings in virtual reality. Then there is mobile game developer Playdemic, creator of Golf Clash, which topped download charts and at its peak saw sales surpass $1m (£760,000) a day. The start-up, based in Wilmslow, south of Manchester, is run by serial entrepreneur Paul Gouge.
That’s not to forget the thousands of rapidly expanding non-tech businesses, from Flame Heating — the fastest-growing heating and plumbing merchant in northeast England — to Cornish clothing brand Seasalt, which has 44 stores across the country.
Yet entrepreneurs outside the Big Smoke are hamstrung by a familiar problem — access to funding. London accounted for 56% of equity investments made into UK companies last year, despite being home to only 20% of the country’s high-growth businesses, according to the British Business Bank. The East and West Midlands received just 2% of investment by value, although 15% of fast-growing firms are based there.
But improving access to funding outside London always seems to be someone’s next priority. The ScaleUp Institute last week recommended developing a regional network of “champions” attached to local authorities, to act as points of contact for business owners seeking advice. Nice idea, but will it bring in the extra cash?
There is some evidence that the tide is turning. The Northern Powerhouse and Midlands Engine initiatives promise a combined £650m of investment into previously neglected regions. A new £40m fund for Cornwall and the Isles of Scilly — the “Pasty Powerhouse” — will bring finance to a part of the country likely to suffer from the withdrawal of EU funds.
Government schemes go only so far. The private sector must step up. The denizens of Old Street must broaden their horizons and open their chequebooks for non-London businesses. Some already are: the BGF, set up seven years ago with £2.5bn of backing from banks including HSBC, RBS and Barclays, has made 73% of its investments outside London and the southeast. It invested £374m last year.
Some say the BGF crowds out smaller investors. Welton argues that this is the sort of small thinking that prevents growth: “We need to think bigger than we do at the moment.”
It goes beyond funding. In the capital, there are networking events most nights for business owners to talk and seek advice. Outside London, support is scarce, despite the efforts of groups such as the Entrepreneurs’ Forum in Gateshead and E2Exchange, which has signed a deal with office space provider Regus to offer meeting places around the country. The government said last week it would expand its Tech City programme with £21m in extra funding.
On trips around Britain, I have been blown away by some of the businesses I have met. Many are thriving, employing local people, turning profits. Imagine what they could do given the opportunities of their London counterparts.