Wednesday 29 July 2015 3:05 pm

London startups reconsider the capital after a year because of property prices

A newly established business setting up shop in London is more likely to consider moving out of the capital after a honeymoon first year, and the high cost of renting is to blame.

The likelihood of leaving London jumps by nearly half after the first year, with 66 per cent reconsidering its location after 12 months, versus 47 per cent prior to that.

Just 37 per cent of young companies yet to celebrate their first anniversary agreed property prices held back growth, increasing to 62 per cent after the first year, according to a study of 500 entrepreneurs and small business owners across London and the south east.

The level of worry over rents only fell below those found in the first 12 months after nine years in business, the research by Sussex Innovation Croydon found, indicating a gap in support for new businesses during the scale-up years between initial bootstrap stage and when they are firmly on the map.

Read more: Spiralling office rents "will push tech startups out of London"

“Our findings reflect the startup journey – a London address provides kudos and contacts when you begin but a year later, the honeymoon is over as bills start to flow in,” said Mike Herd, executive director of Sussex Innovation at the University of Sussex, which is behind the Croydon incubator due to open in September.

“In a reverse of the seven-year itch, our polling shows small firms fall back in love with London only once they’re well established. If London is to hang on to more growth businesses it needs to look again at business rates and affordability.”

More than 70 per cent of 200 tech leaders surveyed by Tech London Advocates earlier this year said they expect rents to rise significantly over the next three years.