Cameron’s ‘tech city’ vision is laudable, but more needs to be done

David Cameron's speech to East London entrepreneurs about the government's long-term commitment to transform London’s East End into "a world-leading technology city to rival Silicon Valley" is laudable in its intent. The prime minister said a number of companies including Vodafone, Google, Facebook, Intel and McKinsey & Co were interested in investing in the region over the longer term.

David Cameron’s speech to East London entrepreneurs about the government’s long-term commitment to transform London’s East End into “a world-leading technology city to rival Silicon Valley” is laudable in its intent. The prime minister said a number of companies including Vodafone, Google, Facebook, Intel and McKinsey & Co were interested in investing in the region over the longer term.

So, what would creating a rival to Silicon Valley really take and what does Silicon Roundabout really need? In order to understand the Silicon Roundabout area we first need to understand why it sprang up. Clerkenwell and Shoreditch have long been creative hubs as talent migrated from Soho to areas with cheaper studio space.

A mix of changing web technologies based on open source software, ever more powerful computers and home broadband services becoming the norm in consumer’s homes set the scene for an explosion in online creativity around the world. The cost of setting up a start-up had become cheaper so the UK’s poor start-up funding environment didn’t have as negative an effect as it had in previous decades.

Over time, a cluster of start-ups bootstrapped themselves together to form an eco-system that was labeled Silicon Roundabout since the scene centred around the Old Street roundabout. Some companies such as Moo.com and Last.fm received international exposure, the UK’s tech reputation was helped further by the pioneering work done online by the BBC, in particular its Backstage programme of public/private collaboration.

But all of this pales in comparison to the size of the start-up scene in San Francisco and south on route 101 into Silicon Valley. Silicon Valley has a number of factors that give it a head-start over other areas of the world:

• It’s ok to fail, the US bankruptcy laws are much more lenient than the UK, encouraging entrepreneurs to learn the lessons of their failures and get back in the saddle;

• Silicon Valley historically has a better funding environment. The first Silicon Valley companies benefited from funding by small regional banks that historically worked with the agriculture sector in the area. Over time it developed a famous venture capital industry based around Sandhill Road in Menlo Park, California and now has a thriving angel investor scene which funds businesses with less requirements for capital. Just this week, Netscape founder Marc Andreessen raised $650 million to invest in web start-ups;

• Silicon Valley has been closely linked to premier research university Stanford which was instrumental in the formation of major companies throughout its history from Hewlett-Packard, to Yahoo! and Google. The university provides a steady stream of engineers and entrepreneurs to the bay area;

• The liberal nature of San Francisco has made it popular with the creative classes and the neighbourhoods of the Bay Area have good quality housing, good policing and a high standard public schools were employees are happy to live;

• Silicon Valley is highly connected to the rest of the world, having San Francisco as an international airport and more importantly, an excellent broadband infrastructure

These are all factors that author and urban studies expert Richard Florida deemed critical for building the kind of technology city Mr Cameron envisages. So, how does the prime minister’s vision match with the criteria for creating a new Silicon Valley?

Whilst the UK bankruptcy laws changed under the previous Labour administration more could be done to create an entrepreneur friendly environment:

• Mr Cameron mentioned that UKTI would be setting up a presence in East London, but there was no concrete measures to either reinvigorate the UK start-up funding sector or attract foreign start-up financiers;

• Whilst London has a number of research universities including UCL and the University of East London’s SMARTLab Mr Cameron did not discuss the role that these institutions could play as catalysts. Secondly the government’s proposed spending cuts on education will adversely affect their ability to innovate;

• Whilst the UK leads the US in areas such as gay marriage, the current libel laws and Digital Economy Bill affect freedom of speech and innovation across large swathes of the digital arena;

• As for broadband, whilst it is widely recognised that internet connectivity is a key economic driver, Left Foot Forward has previously highlighted how unambitious plans for Digital Britain are holding the country back.

Mr Cameron’s sentiment and aspiration to make east London the centre of a digital power house is to be welcomed, but it needs to address the issues outlined above before it is likely to become a reality.

16 Responses to “Cameron’s ‘tech city’ vision is laudable, but more needs to be done”

  1. Shamik Das

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  6. scandalousbill

    Regardless if the fact that the East London Silicon Roundabout is a very pale and low budget imitation of Silicon valley, the support for the UK IT Industry is positive. But East London initiative, as announced, is hardly likely to replicate the impact which PARC had in the germination of advanced Technology stateside. There are some more serious concerns however.

    The plan, with its London centric nature, largely ignores other technology developments and start-ups that have occurred in other areas of the UK. Whether on looks at the erosion of Government funding which impacted a number of online gaming and innovative companies in Birmingham, for example or wonders why Cambridge was completely overlooked as a more logical choice for the centre of activities.

    The New Entrepreneurs visa scheme seems little more than an extension of the controversial intra company transfer policy in place. It could suffer the same abuse where cheaper foreign labour is used in place of UK based graduates, technologists and engineers. Given that UK IT graduates are among the lowest groups to find graduate placements and employment. The two year visas are more apt to create individual, company specific silos of development rather than contribute to the creation of a critical mass for technological innovation.

  7. Anon E Mouse

    scandalousbill – This has been sort of run before called Silicon Glen in Scotland although that was primarily a manufacturing operation which obviously wouldn’t be feasible in London.

    I do fully agree with you on the initiatives in the states and my point regarding Silicon Glen occurred with regional taxpayer support, which also worked to bring manufacturing to South Wales.

    This seems to be a good idea but perhaps a little more thought needs to go into it…

  8. Simon Landau

    Twenty small companies near a roundabout do not deserve the prefix ‘Silicon’. We already have a Silicon Valley in the UK – the M4 corridor from Heathrow to Newbury. The trouble is that it has become overheated for start-ups. A ‘tech city’ concept like the ones in India (e.g. Salt Lake in Kolkata) need to be in areas where all investors are pretty convinced it will not become overheated. Does East London really satisfy that criterion ? I am extremely sceptical and also surprised that Cambridge/Essex (M11 corridor) is not more favoured, especially given the rundown of investment by BT in Martlesham.

  9. Gareth Jones

    http://tinyurl.com/29bued6 Cameron’s ‘tech city’ vision is laudable, but more needs to be done #agree –

  10. http://twitter.com/WilliamCB

    For a politics blog, you are strangely blind to the politics of this.

    As Simon Landau has pointed out, there is no prospect of turning east London into a new Silicon Valley. The places where that is slowly happening are Cambridge and Oxford, and it’s taken decades.

    You have to look elsewhere for the purpose of Cameron’s speech. The purpose is political, it’s about growth and the symbolic value of technology in an age of austerity. See http://exquisitelife.researchresearch.com/exquisite_life/2010/11/how-to-read-david-camerons-speech-on-hi-tech-growth.html

  11. jeff_h

    What about Silicon Gorge around Bristol and Silicon Glen around Edinburgh?

    Silicon Fen is a massive hub for computing.

  12. scandalousbill

    William CB
    “You have to look elsewhere for the purpose of Cameron’s speech. The purpose is political, it’s about growth and the symbolic value of technology in an age of austerity. See http://exquisitelife.researchresearch.com/exquisite_life/2010/11/how-to-read-david-camerons-speech-on-hi-tech-growth.html”

    I cannot see how you think the review by these people offers a particularly valuable insight. I think many people would agree the policies as announced by Cameron are a sham.
    However, their description of the New Entrepreneurs Visa scheme as a perfectly good little idea is as ill informed a comment as I have seen in a long while. Their ensuing commentary of Cameron’s speech is equally unenlightened, particularly in consideration of the rather serious problem of on-shoring it resources.
    This link can perhaps give you some background on this problem.
    http://www.techeye.net/business/uk-big-business-exploits-visa-loophole-to-decimate-it-jobs
    To believe that an innovative technology idea or concept can be taken to successful large scale production, whether Arm Holdings, Facebook or any of the other interested companies outlined by Cameron, within two years, is highly optimistic to say the least. I personally look at this approach as mere political posturing, if not outright bullocks.
    If you, or they, can outline any positive benefits from such a position, I would love to stand corrected.

  13. http://twitter.com/WilliamCB

    @scandalousbill
    Your machine gun bullets are spraying about wildly.
    1. What’s wrong with the Entrepreneurs Visa scheme (as opposed to the general thrust of visa policy)?
    2. I’d like to see more discussion of on-shoring, too.
    3. Surely the point with Facebook and some of the other internet start ups is that they did move to a position of arguably unstoppable momentum within two years? “Production” is not really a useful concept for these kinds of businesses.

    @jeff_h Yes, you could add Bristol or Edinburgh to the list. But it still doesn’t include London.

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  15. scandalousbill

    Willam CB,

    “Surely the point with Facebook and some of the other internet start ups is that they did move to a position of arguably unstoppable momentum within two years? “Production” is not really a useful concept for these kinds of businesses”

    First off, “production” in the context of IT development generally refers to the commercial release or passing into service of an application, system or feature set. Unless your position is that the New Entrepreneurial activities remain as solely intellectual exercises, the concept has some relevance. Simply because an application appears or is downloadable from a web page does not mean that significant underlying effort in service delivery, support, maintenance etc. These are all in-service or production functions.
    With regard to the two year scope you mention, Facebook registered the domain name two years after Zuckerberg began the project, it was a further 4 years after that before it turned a positive cash flow. Similarly, Google took two years before they hired their first employee. I do not feel that the timeline is the most salient consideration. To use it as a pillar of policy, as outlined in Cameron’s speech, will do little to encourage sector growth. Not that it cannot happen, rather the possibility is remote.

    Furthermore, if you look into the history of these companies, the requirement for a significant injection of Capital funding is common to both, as it is to most start-ups. In his speech, Cameron’s invitation was specifically to those who already had funding secured. Aside from the Olympics, why would a start-up, that is a genuine innovator, take on the additional expense to relocate to East London in favour of already established centres? In this context, Cameron’s reference to his Cronies that will make it happen is merely a bad joke.

    For this reason, among others I feel that Cameron’s New Entrepreneur visa scheme is simply a guise for importing cheap IT labour. Within the context of the impending Euro/Indian Free Trade agreement, and the fact that the lowering of IT costs has been cited as a major driver for the arrangement, Cameron’s announcement takes on greater significance. There is no distinction made between a genuine technology innovator and a group to “innovatively” shave IT costs. I think you can distinguish between a centre of excellence and a centre of low wages. I feel that the latter is a far more likely result of the announced policy direction.

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