The government's plan to expand the “Tech City” cluster eastwards to the Olympic Park is misguided, according to a new report, which calls on policy makers to concentrate resources on supporting digital firms in the existing Shoreditch cluster.

Since 2010, the UK’s coalition government has led a high-profile drive to accelerate the development of East London's technology cluster. The ambition, as stated by Prime Minister David Cameron, was to “bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park”.

However, the report published by think tank Centre for London, entitled 'A Tale of Tech City', states that many inner East London firms feel little connection with the Olympic Park, which is seen as distant, inaccessible and with no obvious connections to the Shoreditch community.

“A technology cluster has grown organically in Shoreditch, due to a combination of cheap rents, and artistic-led development in that particular part of London, plus the fact that it is Zone 1 and near the City, “ said Jess Tyrell, deputy director of  Centre for London, speaking to Techworld.

“The growth of a cluster like that is really different from trying to masterplan a new digital hotspot on the Olympic Park. You're talking about Zone 3, where the transport infrastructure isn't yet good enough to connect it seamlessly to the rest of London, and you're talking about a place that has no culture yet.”

Tyrell added that many of the things that entrepreneurs say they like about Shoreditch, like the bars, cafes, meeting places and co-working spaces, do not exist yet in the Olympic Park. Some firms are also worried about the perception of the area, and are concerned that clients and staff will not travel there.

“It may be really desirable to place a tech hotspot on the Olympic Park, but what we're saying is we should separate the two, and if you want to grow the cluster, concentrate on business support for the companies that are here now,” added Tyrell.

Based on the latest available company registration figures from 2010, Centre for London estimates that there are at least 3,200 digital firms and 48,000 jobs in the existing Tech City cluster – far more than all previous estimates. Of those, 1,500 are in the 'core wards' of Clerkenwell, Hoxton and Haggerston.

Tyrell said this was partly because Centre for London had used the government's definition of 'digital', which is quite broad, and also because previous attempts to quantify the number of technology companies in the area, such as the Tech City Map, have relied on crowdsourced data.

The report identifies six areas of concern among entrepreneurs in the the cluster:

  • a shortage of skilled staff due to ill-designed university syllabuses and visa restrictions on non-EU staff;
  • the apparent lack of understanding of the digital sector among financiers;
  • rising rents pushing start-ups out of the area;
  • reliability and speed of broadband connections;
  • lack of access to mentoring in the neighbourhood;
  • little appetite for developing firms into global players.

Rob Whitehead, another Deputy Director of Centre for London, made the point that the government needs to do a lot more to build up a community of specialist technology investors in Tech City, to support the existing community and help promising companies to grow.

“It’s harder for entrepreneurs to access the right kind of finance here compared to the US”, he said. “More can be done to encourage private investors. UK banks, VCs and Business Angels are missing out on the opportunities domestic firms offer, many of who are going to the US for funding.”

Tyrell added that there has been too much focus in the past on attracting companies and investment from abroad, rather than helping domestic firms to export their products internationally. The report recommends that policy should prioritise ‘growing our own’ firms as the central objective for Tech City.

In particular, it suggests that the government should boost the Enterprise Capital Fund and develop a clear legal framework for equity crowd-funding. It should also help entrepreneurs struggling to recruit by easing the Tier 2 visa process and re-instating some post-study work visas.

Finally, the report recommend that the Greater London Authority (GLA) should have greater power over Tech City policy, alongside Number 10. For example, this might allow the Mayor to intervene in office development in the area, to ensure that it is suitable for the digital culture and the way of working.

“Growth of the cluster needs to be more local than national policy allows for, so there are things that the Mayor could do in discussion with Number 10 to help support Tech City development more on the ground,” said Tyrell. “It doesn't really make sense that you've got this really important area of London and the Mayor's not involved.”

Last week Doug Richard, a government adviser and former Dragons’ Den star, launched a harsh attack on Tech City, claiming that “creative start-ups have been profoundly underserved” by early-stage investors because of a “huge preoccupation in this country” with technology start-ups.