Procurement · 16 January 2017

Rising rents push tech startups away from Silicon Roundabout

Old Street roundabout
Silicon Roundabout has seen a 70 per cent drop in new business creation in a year

The proportion of tech startups setting up shop close to London’s Silicon Roundabout has fallen by more than 70 per cent in the last year, as rising rental costs price entrepreneurs out of the area.

The number of startups based near the Old Street roundabout dropped from 10,280 to just 3,070 between March 2015 and March 2016, according to the latest data published by accountants UHY Hacker Young.

Named because of its popularity to web-based business owners and entrepreneurs, Silicon Roundabout has been the UK’s most prominent tech hub in recent years. However, demand for office space in the area has outstripped supply, and landlords have been able to take advantage by increasing rents.

As a result, the research found that Silicon Roundabout has fallen to sixth place in terms of regions of new business creation throughout the UK in 2017, having formerly been ranked first, with many small business owners looking elsewhere for London office space.

To the north of Silicon Roundabout, City Road has become a popular new location for tech startups. The area saw a 75 per cent increase in the number of new business openings in the last 12 months whilst topping the list of UK regions in terms of startup creation.

The area around Leicester Square was ranked second, with a 142 per cent rise in the number of new businesses created in 2016.

The study concluded that the presence of global technology corporates like Google is likely to have attracted programmers and consultants to start work as contractors in the area.

Commenting on the data, partner at UHY Hacker Young Colin Jones said that Silicon Roundabout had become 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,” he said.

The divide between London and the rest of the UK in terms of new business creation was shown by the research to be stark, with just two areas outside the UK capital featuring in the country’s top ten.

Warrington, near Liverpool, came in third place because of the high number of engineering and utilities firms – such as Arcadis and United Utilities – based in area attracting self-employed contractors.

Jones added: “It is evident that new business creation is heavily concentrated in London, which reflects broader trends as the capital’s economy continues to power ahead of regional cities.”

“Silicon Roundabout remains an important hub but London’s tech cluster is now expanding and City Road has become the newest development corridor.”

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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