London Tech City startups crippled by soaring rent prices, told to relocate

Soaring operational costs, an ongoing struggle to recruit qualified staff and a restrictive property squeeze are all factors forming an iron band around tech firms struggling to grow in London, according to a recent survey carried out by YouGov.

Commissioned by Business Birmingham, the survey asked 155 middle managers from London startups how they were growing their businesses, and found that seven out of 10 tech firms in the big city have found it difficult to expand.

The most commonly cited barriers to growth included the actual cost of running the business, a too-shallow pool of qualified and available staff, and a squeeze on office space that’s not only affordable, but high quality.

The price of rent Shoreditch’s Tech City, the survey also found, has rocketed in the past year by 46 per cent. Simultaneously, the vacancy rate has plummeted to five per cent – the lowest level since before the financial crash.

It means that 37 per cent of those business managers surveyed say that one of the above factors has forced them to pass up business opportunities. Despite the capital's Tech City being hailed as the UK's "economy of tomorrow", over 60 per cent of pollsters believe that the UK would benefit from having a bigger, stronger tech hub outside of London.

This is where Business Birmingham has stepped up. With the city of Birmingham being home to over 6,000 tech firms that pour £768 million into the local economy, the West Midlands metropolis would seem to have the space, the talent-pool and office space to nurture fledgling businesses at a third of the cost.

Pete Marsden, the CIO of Asos whose headquarters are based in Birmingham, believes there are huge advantages for companies willing to make the move to the Midlands. “Although it wasn’t part of the business case for locating [Asos] there, the unique culture of Birmingham’s digital cluster and its potential to become an e-commerce hub sealed the deal for us.”

However, a Tech City spokesperson disagrees with the survey’s findings, saying, “This is not a picture we recognise. We now have over 1,500 companies benefiting from the access to talent and investment that the Tech City community provide.

“Rents in Tech City are still half the price of west London and cheaper than King’s Cross and the City. Increases are caused by demand from a lot of growing companies combined with constrained supply.

“We’re working hard with developers to help them understand the needs of growing tech companies to help increase affordable office space.”

The findings follow the news that over 15,000 new startups found their genesis last year within Shoreditch, boosting Tech City to the top of the UK's new business generation chart.