Fewer entrepreneurs are founding startups around London’s so-called Silicon Roundabout area, according to figures obtained under the Freedom of Information Act.
Silicon Roundabout, the name used to describe a part of East London that is often considered a hotbed for tech startup activity, saw new business openings fall by 70% last year, according to accountancy firm UHY Hacker Young, which obtained the figures from HMRC.
The number of companies set up in the area — based around the Old Street gyratory system — was just 3,070 in 2016, down from 10,280 in 2015, and 15,620 in 2014. It’s worth noting that the figures include startups spanning all industries, not just tech.
Surging rents in the increasingly gentrified Silicon Roundabout area are thought to have contributed to the decline in startup activity, with new businesses now looking at cheaper postcodes.
For example, City Road, situated immediately north of Old Street roundabout, saw a 75% increase in the number of new businesses founded last year, jumping from 8,400 in 2015 to 14,710 in 2016, according to UHY Hacker Young.
Leicester Square — situated in central London — saw a 142% increase in startup creation in 2016, possibly fuelled by the presence of nearby Google.
Colin Jones, partner at accountancy firm UHY Hacker Young, said in a statement: “Silicon Roundabout has fallen off the top spot in terms of new business creation, it is a victim of its own success. The Silicon Roundabout area gained popularity with internet companies originally due to its historically low rents. Now that rents have soared, the area has lost its competitive advantage.”
It’s not just startups that are neglecting Silicon Roundabout. Silicon Valley firms like Google, Facebook, and Apple have chosen to set up their UK headquarters in other parts of London.
Former Prime Minister David Cameron endorsed Silicon Roundabout in 2010 when he created a new government quango called the Tech City Investment Organisation (TCIO), since renamed to Tech City UK, to support and promote tech companies in the neighbourhood. The organisation’s remit has also been expanded to support tech hubs across the UK.
Gerard Grech, CEO of Tech City UK, dismissed UHY Hacker Young’s report, saying it’s only a good thing that tech is spreading out across London and the rest of the UK.
“Anybody trying to build a negative argument about the relative performance of a single postcode in East London is seriously missing the point and in danger of talking down one of this country’s great global strengths,” he said in a statement.
“Outside of Silicon Valley, the UK — and London in particular — plays host to one of the biggest tech scenes on the planet. We continue to dominate tech innovation in Europe, streets ahead of Berlin, Paris and Stockholm and for good reason. Tech City UK has been, is, and will continue to play a lead role in that growth.”