Digital start-ups question links to 'Tech City'

Unruly, the social video advertising agency, has a typically fashionable east London office with high ceilings and exposed brick walls.

"We were here before Tech City was here and, in fact, before Silicon Roundabout was here," says Sarah Wood, who co-founded the company in 2006.

She is referring to Tech City, the quango launched in 2010 that was supposed to be the heart of Prime Minister David Cameron's efforts to foster technology start-ups in the area surrounding Old Street.

"Our ambition is to bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make east London one of the world's great technology centres," Mr Cameron said in 2010.

Tech City UK, as the body is now known, says digital businesses have flooded into the area in the past five years and employ some 251,590 people.

According to research by the London School of Economics and National Institute of Economic and Social Research, the number of digital jobs in the area climbed from 16,578 in 2012 to 18,679 in 2013.

"Policy has certainly hugely raised awareness of the London tech scene," says Max Nathan, a senior research fellow at the NIESR.

But not everyone believes government deserves the credit. "What we have to be careful of is that they [the government] are not the ones who have done this on their own," says Russ Shaw, founder of Tech London Advocates, a lobby group for the industry. "This is being built by talent, by funding and by great ideas."

Critics also point out that as more companies have moved to east London many start-ups that were already there have been hit by spiralling rents, an acute shortage of skilled workers and painfully poor internet connections - pushing some of them out of the area.

Some 26 per cent of companies surveyed by Tech London Advocates say they have considered relocating outside the city as rents rise, while 47 per cent say poor broadband is damaging the area's reputation.

"Creative businesses are moving out," says Sue Terpilowski, chairman of the London Policy Unit at the Federation of Small Business, who relocated her own marketing firm from Shoreditch to Canary Wharf. "You're losing your natural ecosystem of people around you."

All three of the main UK political parties included the promotion of Britain's technology industry in their election manifestos, but with scant details outlining how they plan to achieve this.

Last week, 90 technology entrepreneurs wrote a letter in the Guardian newspaper, praising the Conservative party's support.

Yet some entrepreneurs complain that it is only high-profile businesses and entrepreneurs with strong connections to those in power that have benefited.

"With the government the problem is you need to know people," says Ruben Kostucki, co-founder of Makers Academy, a start-up that teaches coding.

"You need to be a Rohan Silva," he adds, referring to the former Downing Street adviser who masterminded the government's Tech City UK policy and launched a high-profile co-working space near Brick Lane area called Second Home. "You can pull all the strings you want because people know you."

The government is credited with increasing tax breaks for investors in early-stage companies, via the Enterprise Investment Scheme (EIS), and the Seed EIS scheme, which raised more than £80m in its first year.

Early-stage businesses in the area suggest that infrastructure and talent remain the biggest challenges.

"We don't treat broadband as a public utility as they do in Japan or Australia," says Mr Nathan. "We don't really regulate the way that companies serve customers."

Makers Academy was forced to equip students with expensive dongles when BT, its telecoms service provider, failed to install a connection before its first class began. In January, a pilot project, part-funded by the government, was announced to provide faster internet connections for businesses in the area.

"Tech City cannot be built simply on hyperbole," Emily Thornberry, a Labour party MP whose constituency includes parts of the Silicion Roundabout area, told Parliament in February. "We cannot make Tech City one of the world's great technology centres . . . when it takes nine hours to upload a 2.5 minute film."

The acute shortage of skilled workers also continues to hold the sector.

Kristo Kaarman, the Estonian co-founder of TransferWise, a money transfer business that has been valued at $1bn, says: "The one thing the government can do is to make it easier for people to travel for work and to move for work."

While the government has been applauded for introducing coding to the school curriculum, entrepreneurs are looking overseas to find the talent they need immediately.

And the ability to attract founders has also been hit. Of the 250 visas Tech City UK could dole out to exceptionally talented entrepreneurs, only seven were distributed in the year to April.

"The purpose of this visa route is to attract applicants that demonstrate world-class aptitude to ensure our sector can compete on the world stage," Tech City UK explains in a statement. "The figure of 200 is not a target but rather a maximum allowance."

Nonetheless, while the government's policies may fall short in certain areas, local entrepreneurs insist the government's efforts have helped raise London's profile as a tech hub.

"What we really value in London, in Shoreditch in particular, is the environment," Mr Kaarman says. "It's the idea that you have lots of creative people working in close proximity - it's our own kind of square mile."

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