Government must not rely on London tech firms to drive jobs

The UK remains a tale of one city when it comes to start-ups.

New figures from UHY Hacker Young suggest that of the top 20 postcodes for new businesses, all but three are in London.

Of those, leading the pack by a dramatic margin is EC1V – the so-called Silicon Roundabout. There, almost 16,000 new firms were started during 2013/14.

There are, of course, some caveats here. Many firms offering registered office services are based in the area, meaning that some of those 16,000 firms will not actually be operating from the postcode. However, Hacker Young’s survey demonstrates the continued dominance of tech in the UK’s start-up landscape – and this is an imbalance that needs redressing.

Tech firms are a vital part of the UK’s recovery, and are coming to form an increasingly important part of the country’s economic backbone. They are exciting businesses about which it is easy to write, and they now seem to dominate the business pages. The idea of a British Silicon Valley has been romanticised in the press, with the trope of the ‘rock star’ coder gaining traction.

Much of this is welcome: tech businesses are crucial to the country’s economic future. We are based near EC1V, and it remains a thriving community of forward-thinking businesses.

But we should be reticent to put all of our eggs in the silicon basket. Although unemployment figures have eased, a lack of stable, fairly paid, full time jobs remains one of the most important problems facing the UK. Tech firms tend to pride themselves on a low head-count, especially when they are bootstrapped. While lean businesses are a great achievement, the scope for labour expansion amongst many of these start-ups is by definition limited. Indeed, the raison d’être of many tech firms is to improve automation services, and therefore reduce the need for labour. Clearly, automation is to be welcomed when it is put in the service of humans, and when it is used to improve the working lives of the country’s labour force. But the idea that tech firms will deliver a jobs-based recovery should be treated with scepticism.

The government has thrown its weight behind tech, for example with its very public support of Tech City. But it is vital that politicians think beyond EC1 if they are to truly help the UK’s small businesses kick-start the economy. Indeed, in other surveys the UK is becoming a more even playing field. New figures from Barclays suggest that regional businesses are catching up with those in London: while London firms recorded growth of 10 per cent during the first quarter, the South West and North West were close behind, at 9.3 and 9 per cent respectively. Regional firms can flourish, but they are being unfairly overlooked by a government increasingly obsessed by the romance of tech.

In this Parliament and the next, politicians on both sides of the Commons must demonstrate new thinking when it comes not only to regional businesses but also to those operating in other key industries such as manufacturing. Tech is a crucial part of the UK’s economic mix, but for too long the coalition has prioritised a tiny corner of London, and a tiny fraction of the UK’s industries, at the expense of others that can help boost jobs. It’s time for Westminster to think beyond the boundaries of the capital to ensure an even, sustainable recovery.