Funding and skill shortages could halt the future development of London’s Tech City area in East London, a new report has warned.
Tech City is the name used to describe the Old Street roundabout area in East London, which – in recent years – has been called home by a growing number of tech giants and startups.
The Tech City Futures report, which was compiled by analyst house GfK and business advisors Grant Thornton, shines a light on some of the growth challenges companies are facing, and features responses from 131 of the area’s senior business leaders.
Without development capital, tech firms are not only in danger of missing their growth opportunity, but risk failing completely before they've really even begun.
The report flags several areas of concern for Tech City business leaders, including a shortage of skilled IT workers and funding problems.
“The biggest single challenge facing London’s tech businesses is a shortage of skilled workers in the jobs market...[people with] specialised digital and technology skills, like coders, developers and usability specialists,” the report states.
Seventy-one per cent of the Tech City business leaders who took part in the research reported problems finding people with the right skills for their organisation, with 77 per cent complaining the situation was hindering business growth.
Meanwhile, lack of capital was a concern raised by one in three, with many claiming to have missed out on “significant” business opportunities because they could not secure funding quickly enough.
“The tough economic climate means there is often a lack of access to capital funding beyond seed funding...and as a consequence of this lack of capital – tech businesses struggle to find the marketing budgets to promote their business proposition to a wider audience,” the report continued.
Furthermore, 19 per cent admitted making redundancies because of trouble accessing funds.
“Only 14 per cent of [Tech City] investments are funded by traditional bank loans, making it difficult to grow businesses without losing some equity share by private investors,” the report adds.
“Whilst private investors offer a critical source of finance to the growth ambitions of tech businesses, the poor economic outlook, combined with the risk profile of many tech startups, means banks are often unwilling to lend.”
Smaller tech firms are also feeling the pinch because of an influx of larger and higher-profile companies flocking to the area, the report warns.
“Large tech firms are moving into the area and setting up schemes and communities that support the growth of startups,” it explains.