The City of London, or the Square Mile as it is often known, is synonymous with traditional financial services firms. However a recent report shows that the exclusive London enclave is looking to attract more technology startups in a bid to modernise its image.
Fintech, insurtech and regtech are all booming areas within the London startup ecosystem, and the City of London Corporation is starting to ask itself if it needs to provide dedicated spaces for these startups to work within the confines of the City, in closer proximity to the companies they are looking to disrupt or augment. This will require a change in perceptions of the area, which tends to be seen as a traditional and expensive place to do business.
The report conducted by the City of London Corporation and City Property Association (CPA) states: "Young, nimble and digitally focused businesses are challenging decades old incumbents, and the City must adapt once more, responding to the cultures, practices and aspirations of such companies to stay a vibrant, populated area of commerce."
Andy Pyle, the UK head of real estate at KPMG, told Techworld: "The City at its core has been dependent on financial services, but as they are disrupted, and with Brexit, there will be some jobs likely to move out of London, so diversification is important."
The first step for the City will be changing these perceptions if it is to attract a different type of worker.
The report asks: "Is an area comfortable with a traditional business week ready to meet the demands of employees who work when and how it suits them? Could it be that internet connectivity, public transport and street-level coffee culture are better served in the surrounding creative and tech enclaves of Shoreditch, Spitalfields and Smithfield?"
The report lays out its strategy for changing this, starting with a flagship, branded accelerator in the City: "Most City property owners feel that a single, City-branded accelerator/incubator space would be the best way of attracting emerging technology and facilitating an exchange of ideas between small companies and established firms."
As it stands the City is flagging when it comes to shared coworking spaces in the area, with very few of London's accelerators and incubators located within the Square Mile.
Pyle from KPMG points to the success of the Level 39 accelerator in Canary Wharf as a good example of how this 'clustering' approach can change the feel of an area quickly.
The City is apparently looking at tech clusters in Sydney like Silicon Harbour and the transformation of the King's Cross area in London as blueprints. King's Cross has done a great job of transforming the retail offering around the station since the new station concourse opened in 2012. The area now counts Google and a number of tech startups as residents.
Despite the perception that areas like Shoreditch are cheaper than traditional spaces like the City, data in the report shows that rents are homogenising across the whole of London.
Naturally, cost will always be an issue when it comes to office space, and worryingly the report found that although landlords are supportive of attracting emerging technology businesses to the City, they are "hesitant to offer discounts or enticements".
The City of London Corporation recognises its role in changing this, and says it will "need to convince them that the wider benefits of attracting startups will mitigate the possible lower valuation of buildings containing tech companies".
"Now that the value of diversity is being recognised, owners feel that they can work with the City of London Corporation to shift perceptions, create cohesive public spaces and refit offices that suit a wider range of needs. The City can become a 24/7 hub with a social aspect."
Speaking with Techworld, Daisy Gleeson, marketing and PR manager at insurtech startup Digital Fineprint, said: "As rental costs in more traditional start-up locations such as Shoreditch are rising, it is causing entrepreneurs to look for more affordable office space elsewhere.
"It would of course be preferred to be within the City where there is such a high concentration of financial companies... The major downside is that the average cost of an office in the Square Mile is £90 per square foot per annum, which is probably too much for young startups."
Ishaan Malhi, CEO and founder of online mortgage broker Trussle, told Techworld: "My perception is that the area has been prohibitive to startups from a cost and culture perspective. The City has been hugely successful in attracting large and high-salaried companies to the area and many of the surrounding cafes, restaurants, and shops accommodate for that audience as a result."
There are still some clear preconceptions that will have to be ironed out if the City is to become a true melting pot of old and new. Startups responded to the authors of the report with concern that they will be "seen as second-class citizens within the Square Mile" and are wary of becoming "marketing initiatives for a corporate innovation agenda".
Despite respondents from large corporates saying that they "unanimously believe that they would reap the benefits of being in close proximity to young, innovative companies" those from the tech sector displayed concern "about the threat of exploitation by large corporates".
Incumbents also fear a dilution of the "historic context of the City" and are wary of the trendy fads of startup culture infiltrating the area. The report states: "While the likes of street food and outdoor cinema events sound appealing, interviewees noted that the City remains a working environment, so the needs of more traditional occupiers must be considered in respect to crowds, access and noise."
The report outlines the lure for the area to tech startups: "Access to talent and expertise, a huge potential for commercial partnerships with established players and an explosion in demand for digital products within finance."
Becky Downing, CEO of insurtech startup Buzzmove, told Techworld: "The City has great transport links and locating in the City would be a great way to reiterate our message that we're open for business and ready to partner with more insurers on our latest blockchain-based product offering."
However, she is resistant to the Silicon Roundabout clichés that the report hints at.
"While cafes and outside meeting spaces can be useful, that's more for early-stage startups," Downing said. "What we'd really need is plenty of office meeting space and completely reliable broadband connections. We're not really interested in hanging out with startups as much as we are partners and customers. We're not seeking to be "cool", we're seeking more growth, more success and more partnerships."
Also, modern startups don't appear to value physical proximity to potential customers or partners as much as the report assumes.
Downing said: "In today's connected age, physical proximity to insurance companies is really not that important from a practical perspective. But the psychological impact of being right next door would be much greater – both for our existing and future insurance partners, and for our customers, knowing that we're located in Britain's most prestigious financial district."
This mirrored comments from Phoebe Hugh, cofounder and CEO of insurtech startup Brolly, who told Techworld: "In reality, being in walking distance doesn't provide enough tangible value to us for it to influence our decision of where to be based, being in London is good enough. We also like being an outsider in a sense, as it gives us adequate space to focus on evolving the industry, whilst not being too attached to the 'now'."