Chuka Umunna: London risks losing out on best businesses if we don’t get our house in order

Sussex Innovation, which carried out the study, revealed that two thirds of small business owners in London and the South East are considering moving away from central London over the next five years. The figures are even higher for technology startups – at 78 per cent. While East London has become a well-known tech hub for some of the capital’s best and brightest businesses, the rising cost of rent may become a growing problem. The research was carried out among 501 business owners, entrepreneurs and senior decision makers in London and the South East.  

Speaking to Real Business, Umunna said that the role of universities in supporting businesses’ development is becoming more significant. “I think our universities across the UK are doing interesting things now, where they don’t just pack you up and send you off when you’ve finished your degree. If you’ve got a good idea which you want to commercialise, the science and engineering faculties are all really keen for you to stay and do that within, or close to, the university.” 

The Labour politician has been impressed with several similar initiatives, visiting the University of Chester and the University of Northampton, both of which have innovation centres to support new and growing businesses.

Croydon’s new business incubator is set to open in the summer of 2015, and marks the first off-campus initiative from Sussex Innovation, the network owned by the University of Sussex. It will offer a base for up to 30 high-growth potential companies and over 300 employees, while supporting a further 100 local businesses through its network too.

Mike Herd, executive director of the Sussex Innovation Centre, said the decision to pick Croydon as the next location of the business incubator was partly to help provide a “North-South network,” and partly to tap into the huge talent pool on offer in the surrounding areas. 

“Croydon lacked a focus, and this was about building that critical mass,” he told us. “The talent pool here on the developer side is really huge, it’s a big catchment area.” 

While Sussex boasts an impressive success rate – some 80 per cent of the businesses which have received the Innovation Centre’s support have gone on to become profitable firms. Herd acknowledged that for the 20 per cent or so who fail, it’s “best to fail early.” From his perspective, their primary aim is to “teach people how to run businesses, it’s not necessary about ability,” an opinion supported by his colleague Peter Lane, the innovation support manager. 

“You could have a fantastic idea, but just have the wrong people behind it, and fundamentally, every successful idea comes back to the people at the heart of it,” Lane said.

Utilising the scope of student talent has also meant Lane has been hyper-aware of a shift in mentality among younger demographics regarding entrepreneurship as a viable career option: “We’re really seeing increasing interest among uni students, where work is maybe seen as a different cultural thing for them. That startup environment is becoming incredibly attractive and we’re definitely noticing a shift towards it.” 

He also stated that the prospect of taking on a wide and varied role is an appealing prospect for students, as opposed to other jobs where you’re carrying out one primary function. “I mean, I’d find it boring in comparison too!” he added.

Despite this, Lane said there’s still considerable room for the next government to help foster a more hospitable environment for small and growing businesses – and a core part of this would be “starting education earlier. Helping younger people find out what entrepreneurialism could mean to them, and developing that culture much earlier on.”

The branching out of locations for business incubators and other similar innovation initiatives, is an important step in taking pressure off the squeeze many businesses appear to be feeling in central areas of London. Average rents in areas like Shoreditch and Clerkenwell were up five per cent in 2014 to £52.50 per sq ft, and are predicted to rise a further nine per cent in 2015. Sussex Innovation-Croydon will average £45 per sq ft, inclusive of rates, and the centre has said subsidies will help to drive costs even lower. Umunna said that it’s imperative we take the rising property prices seriously.

“To use an example, I went to Berlin and met a business which is very-well known now, SoundCloud, where DJs and other music people distribute their music,” he said. “I remember them telling me they were looking at London, Berlin, Stockholm and another European capital. They went for Berlin, and one of the main reasons was that property prices and the costs of doing business were lower.”

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The shadow business secretary believes that London, and the UK, are at risk of losing out on prospective talent if things go on as they are. “That’s what we’re up against if we don’t get our house in order, in terms of providing affordable business space and facilities. People like London – it’s a dynamic, culturally rich city, but we’ve got to keep an eye on the costs, if we want to keep attracting businesses and people with the ideas.”

He’s not the only one to feel this way, and slowly but surely these initiatives are becoming more widely-known outside of London. Louize Clarke and Adam Clark founded the Reading-based startup accelerator hub ConnectTVT last year. Clarke said the aim was to encourage “fresher, more innovative tech skills into the Thames Valley.”

While Thames Valley has a heritage as “the original Silicon Valley of Europe,” as Clarke puts it, she noticed that the area could use a central mouthpiece to bring prospective talent together. “We have the experience and infrastructure that tech giants like Microsoft and Dell offer, and our potential lies in bringing this together with talent coming out of colleges and universities.”

Running The Festival of Digital Disruption for the week has provided a platform to showcase just what technology talent is in the area, and an occasion for both the business and education communities to come together. Clarke said she hopes to run the event again, and will be focusing on “education to drive next generation digital capabilities within the region.”

Clarke also mentioned the need to look past the tech sector for budding startups, and hoped to develop a range of products and services at the hub in Reading. Honey, a new social creative agency, is based at GROW – ConnectTVT’s co-working hub, and despite originally looking to locate the business in London, found Reading a more sustainable option. Partner and founder Chris Adams said: “We have access to great people and in terms of location, it’s great – our flagship client is based here too.”

The rising property prices in central London are prompting some businesses to broaden their horizons. And if Croydon’s new business incubator progresses as expected – over the next three years it is estimated the businesses will generate £6m in turnover and raise £1m in investment – Sussex Innovation is likely to expand elsewhere too.

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