In the UK there has been a lot of talk about “levelling up” investment outside of London. For some time during the Johnson administration, it felt like no two days could go by without the words “levelling up” being foghorned from the spokespeople of various government ministries. Yet going into 2023, it’s still unclear exactly what the term means, although there is no doubt that some form of action is required when it comes to supporting investment up and down the country.
Regional strengths have contributed to a rich and varied tech sector expanding up and down the country. Bristol, Cambridge, Edinburgh, Leeds, London, Manchester, Nottingham and Oxford have more unicorn businesses – 112 – than France and Germany combined, according to new data released by the department for digital, culture, media and sport at the end of last month. This is encouraging data, but the picture is more complex than that.
Businesses in the most deprived areas of the country show greater ambition for growth. Yet they are also less inclined to apply for finance and more likely to be turned down, according to a report by the British Business Bank. On the other hand, we have London, the thriving financial centre that has long dominated equity investment in the UK.
Capitals aren’t always the leading tech hubs of their respective countries – see Bangalore in India, San Francisco in the US or Shenzhen in China. Yet in the UK, London remains unquestionably the leading place to found and scale a successful tech start-up.
The first reason is availability of financing. Access to capital, particularly seed capital provided by expert investors, is essential. Though startup financing is now practically borderless, London dominates venture capital investment in the UK. It has a vast network of investors including many of the largest funds globally.
Then there’s the experience; London is the UK’s stomping ground for repeat entrepreneurs who have founded, scaled, failed and successfully exited multiple start-ups. It is often a failed start-up that lays the foundation for a successful one, and the lessons learnt through the process are invaluable.
Finally, there’s a point to be made about London’s broader ecosystem. As the civil, financial and commercial capital of the UK, tech founders in London have access to all the other essential elements they need, ranging from mentors, consultants, digital marketing and sales to PR experts, regulatory experts and government policymakers.
So when we propose levelling up – or whatever equivalent term – we need to think about how to make all of these factors available across the UK. In the political realm, devolution is often touted as the best way to resolve inequity. But perhaps we would be better off developing a national network that incorporates London rather than regional hubs and regional investment funds. The idea of independent and separate regional hubs doesn’t necessarily make sense in the digital age and risks leading to a suboptimal duplication of resources. The emphasis on regional investment funds overlooks the need to provide a start-up with all the success factors.
Instead, we should be incentivising London’s early-stage investors to look back to the enormous talent potential that can be found right across the country. Crucially, we must also create the right national ecosystem that connects entrepreneurs outside of London with the capital’s entrepreneurs, mentors and service providers.
Start-ups are finding their beginnings all over the UK. All it takes is a great idea and ambition to get started. Whether a start-up is founded in Blackpool, Bristol or Bangor, the important thing is access to the right investors, transfer of experience from entrepreneurs and best-in-class services. Ultimately, creating an environment in which the UK’s next most influential tech founders and innovators can comfortably start their business anywhere in the country will be beneficial for the economy as a whole.