Whether as “Tech City” or “Silicon Roundabout”, the cluster of digital start-ups centred around Old Street in East London is well known. The extensive network of similar start-up clusters in cities outside the capital, however, has now been revealed by a thorough study of the UK’s start-up scene.
Since the economist Alfred Marshall developed the idea of “spillovers” back in 1890, there has been debate over how best to encourage the transfer of knowledge between organisations. The perceived wisdom is that, by co-locating similar organisations in clusters, knowledge will circulate between them and drive further innovation.
Keen to promote economic growth, governments have striven to develop clusters artificially, with planners especially keen to replicate the success of California’s Silicon Valley with the UK’s high-tech industries – hence Silicon Fen (Cambridge), Silicon Glen (Scotland), Silicon Gorge (Bristol), and so on. In this sense, while the findings of last week’s TechNation report by Tech City UK are interesting, it isn’t a surprise to see so many clusters emerging elsewhere.
Strength in numbers
Media reporting on tech clusters is often London-centric, but the TechNation report shows that this isn’t the full picture: 74% of digital companies are based outside London. Inner London is the third-fastest growing cluster in the UK, but it’s Brighton & Hove that has the highest concentration of digital businesses (3.3 times the national average). South Wales is fast developing as a centre of health tech and data analytics firms, and Bournemouth, a centre of digital advertising and publishing, has quadrupled the number of digital businesses since 2010, while Liverpool, a centre for UK games development, has more than doubled.
Naturally many of the growing centres for digital business are Britain’s other major cities: Manchester’s well-established media and publishing industries have gone digital, boasting the country’s highest per-company turnover. Bristol and Bath are globally significant areas of high-tech engineering with Hewlett Packard, Bristol Robotics Lab and the Bristol and Bath Science Park. Leeds and Edinburgh are strong in financial tech businesses, Belfast and Dundee are strong in games development. But there are others that might seem unusual, such as the centre for cybersecurity expertise developing in Great Malvern, alongside GCHQ in Cheltenham.
Building success
Being in a cluster can enable access to infrastructure, knowledge and skills for dynamic but usually resource-constrained small and medium enterprises.
The high costs of research and development have led to renewed interest in what Henry Chesbrough has called open innovation, which builds knowledge sharing into the business model of start-up companies. This has allowed tech start-ups with few resources to develop rapidly by drawing upon the expertise of universities and other firms.
Interestingly, as the tools to work remotely have improved, it’s no longer necessary for firms to be permanently located in clusters to benefit from collaborations and hack events. For example, the Open Data Institute maintains several “nodes” in more remote parts of the country, such as Devon, which allows distant companies to connect to knowledge-sharing facilities in London and elsewhere. Clusters themselves are interlinked, and this provides provincial tech clusters with an advantage: being able to draw upon others’ knowledge to create solutions and products without the high cost of being based in the capital.
Our own research suggests that even mere affiliation to a cluster or participation in professional communities can be enough to help start-ups by raising their profile and providing legitimacy and reputation in order to help advance firms’ chances in a global market. A strong cluster identity also attracts highly skilled employees, which develops a labour pool with more diverse skills, in turn driving better and faster innovation.
In this sense, geographical location is important. Cosmopolitan urban areas with access to bars, restaurants and education attract talented young workers, drawing new generations of talent into the cluster. Subsequently, tech clusters don’t just appear in London but are supported by the strong cultural draw and educational centres of Sheffield, Greater Manchester, Bristol & Bath and Brighton & Hove.
What doesn’t work?
Problems faced by tech clusters are often features of their own success. Competition for office space and employees drives up costs for everyone – and their appeal may attract large, incumbent firms that can out-gun smaller firms in acquiring resources. In this way the young, dynamic start-ups that the clusters were created to assist can find themselves squeezed out – something already occurring in Silicon Roundabout and throughout London.
The rising costs associated with tech clusters in London may see a further increase in the appeal of clusters outside of the capital for Britain’s tech community. What is needed is venture capital, business advice, additional training and support for national and international networks to ensure these clusters can overcome the financial and skill gaps in order to grow. As the TechNation report rightly points out, each cluster has its own unique configuration and this needs to be taken into account; any one-size-fits-all approach is doomed to fail.