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16 September 2021

The last days of Silicon Roundabout

Nearly a decade after David Cameron launched Tech City, Shoreditch has been dramatically transformed. But what is the initiative’s legacy?

By Oscar Williams

In November 2011, David Cameron unveiled plans to promote a new entrepreneurial cluster that was quickly emerging in the post-industrial warehouses of East London. But while the prime minister had a vision for transforming Shoreditch into a British Silicon Valley, he needed someone who could make it a reality. Eric van der Kleij, a Dutch entrepreneur, was the man chosen for the task.

Three months after Cameron’s announcement, van der Kleij was invited into Downing Street to meet some of the prime minister’s closest aides. Rohan Silva, Steve Hilton and Tim Luke liked van der Kleij’s ideas and moved quickly to hire him with a pitch that was characteristic of the political moment. “The Big Society was becoming quite a thing,” van der Kleij tells me when we speak in August. “For the advisers, it was the proof point that Big Society works if somebody like me from society could step up to get involved and make a difference.”

Silva had also secured a significant victory during a trip to Silicon Valley. The adviser had convinced Google’s then-chairman Eric Schmidt to open a startup campus just a few minutes’ walk from what had come to be known as Silicon Roundabout, Old Street’s monochromatic concrete junction. “A brand like Google deciding to put Campus into a regenerating area of a city was an incredible validation,” says van der Kleij, “and one that we absolutely leveraged globally to ensure that others followed.”

But a decade later, in June of this year, Google announced it was withdrawing from the area, shutting Campus’ Shoreditch outpost. Less than a year earlier, Tech Hub, London’s first tech-focused co-working space, had also closed down, citing falling demand and rising rents. Insiders say London’s tech sector is now as strong as it has ever been, but is the closure of these spaces evidence that Cameron’s Silicon Roundabout vision failed, or that it succeeded?

The Tech City Investment Organisation (TCIO) launched in 2011, just a year before London played host to the Olympic Games. Cameron envisaged a tech district that would stretch from Shoreditch to the Olympic Park. The government hoped the Olympics would provide a springboard for TCIO to promote Britain’s high-profile startups to the world.

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But selling London’s burgeoning startup scene to overseas investors was only one of TCIO’s ambitions; the other aim was to develop the infrastructure and policies needed to help the tech sector thrive. In order to ensure entrepreneurs were being heard, Tech City would gather 20 to 30 founders each month for a breakfast meeting in Downing Street.

“We were feeding into central government the real difficulties and challenges that the founders were having,” says van der Kleij. “And you saw something like the result of that was probably five major policy changes in under two years.” Two of the initiatives that emerged from those meetings were improvements in Shoreditch’s woeful broadband provision and tax relief to incentivise angel and venture capital investors to fund early-stage startups.

During this time, the London tech scene grew with remarkable speed. The financial technology (or fintech) sector grew particularly quickly, especially in Shoreditch, thanks to its proximity to London’s finance district.

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Today, more than a decade after the launch of Tech City, the UK’s best funded fintech companies are still positioned on the cusp of the City and East London, bridging the gap between the worlds of finance and tech. The challenger bank Revolut, which was founded in Canary Wharf, and the payment firm Wise are located on Shoreditch High Street. Fellow challengers Monzo and Starling lie just a few minutes’ walk south, towards the City. Collectively, these companies have raised several billion pounds in venture capital funding.

Having attracted the most investment, fintech is widely regarded as UK tech’s most prized asset. But it is not alone in driving the growth of the industry. In fact, neither of the two homegrown tech firms that have listed in the last year, Deliveroo and Darktrace, focus on finance. Nor, as Business Insider noted last year, are they based in the area surrounding Silicon Roundabout. Deliveroo is headquartered in the City, while Darktrace is based in Cambridge.

Tech City’s executives contend, however, that focusing on the growth of a small, trendy and geographically defined area of London helped establish the capital’s presence as Europe’s preeminent tech hub, while also modernising the image of the British tech industry.

With the number of $1bn+ “unicorn” startups rising from ten to 100, no one challenges the notion that UK tech has grown rapidly over the last decade. But the question is whether Tech City merely rode the wave of organic growth, or accelerated that growth, and if it did, whether the consequences have been wholly positive.

Perhaps unsurprisingly, Gerard Grech, the CEO of Tech Nation (formerly TCIO), is adamant that government support has been instrumental in the tech sector’s development. “The intervention by Tech City proved extremely successful in the early days,” Grech tells the New Statesman. “It was organically growing, but then it became inorganic growth because you can see from 2012 onwards, when you look at the data, there was a bump in startup creation, and then unicorn creation from about 2015 onwards.”

2019 report by the urban science expert Max Nathan at least partly supported this theory. Nathan created two models which projected the rise of the Shoreditch tech industry with and without the support of the Tech City initiative. Nathan’s modelling revealed that thanks to Tech City, the tech scene grew significantly larger.

“The area would have kept on growing, but the growth rate was definitely steeper because of the policy,” Nathan told Wired last year. Tech Nation’s own data also lends weight to this theory; 29 per cent of Britain’s billion-dollar tech companies have been through one of its programmes.

But Nathan’s report produced a second, more concerning finding. By boosting the number of startups based in Shoreditch, rents rose, overheads grew and the companies therefore became less productive. Many startups went bust and the benefits of having a closely focused community of like-minded entrepreneurs started to disappear. The number of companies being launched in the area fell significantly in the mid- to late-2010s.

Moreover, the analysis found that “many policy ‘effects’ actually started *before* 2010, and got weaker afterwards”, Nathan wrote. “[This is] also not good, and suggests added value is often thin.”

Ben Southworth, who served as deputy CEO of TCIO alongside van der Kleij for a year, admits that “sometimes I walk around Shoreditch and look at all the skyscrapers that have gone up and worry that we exacerbated the gentrification of an area. But now, when I talk to people retrospectively about this, the arguments are that it was kind of a fait accompli, that it would have ended up being gentrified naturally due to its location.”

Southworth pushes back against the rent-based criticism. “We increased funding, we increased the number of jobs, but as such, we increased the retail estate value. And the problem which we solved was the financing piece, but then, unfortunately, financing still requires you to have an office. But that’s kind of just how the market works.

“With any sort of big, ambitious idea, there’s always going to be a detriment, and there are always going to be individuals who say you could have done more, you could have done better. But my experience of working with governments, both here and abroad, is quite often that governments’ one ability is to try and make the least wrong decision, rather than the best possible decision.”

Van der Kleij is also thoughtful about the unforeseen consequences of his work. “I’m very pleased that the prosperity that we’ve created there has made it much more attractive and much safer. But I am concerned, I will be honest, that we have not been as inclusive and porous as we could have been, and that’s the thing I would look to improve in the future.”

After the Cameron government disbanded following the EU referendum, tech entrepreneurs found themselves locked out of Number 10. This was partly a result of the May administration’s preoccupation with Brexit. But it was also a reflection of the shifting interests of the government’s most senior advisers.

A remarkable number of the aides who worked on Tech City during the Cameron era went on to have high-profile careers in the tech industry, both in the UK and the US. Rohan Silva co-founded Second Home, a co-working space for startups that was launched on Hanbury Street in the heart of Shoreditch. Daniel Korski, who became one of the tech sector’s key contacts in government after Silva left, launched a venture capital fund for the govtech sector, and Steve Hilton moved to California with his wife Rachel Whetstone – a comms director who has worked for Google, Uber, Facebook and Netflix – and founded a startup called Crowdpac.

Under the May administration, the UK government became markedly less friendly to the tech sector, with some members of the community feeling that the backlash against the US tech giants had also damaged the government’s relationship with Britain’s tech firms. Rather than promoting tech entrepreneurship, the government’s high-profile tech policies largely focused on limiting the harm that Big Tech could inflict on society. May’s approach to immigration also alarmed the London tech community, whose success was underpinned by foreign talent.

Despite a cooling of relations between the startup sector and Downing Street under the May era, fears that Brexit would undermine the competitiveness of UK tech appear to have passed. In 2016 the French president Emmanuel Macron visited the VC firm Balderton Capital to give a speech to 200 entrepreneurs. James Wise, a partner at Balderton, remembers his speech clearly. “He came into our offices and said to the entrepreneurs there, ‘it’s time to come home; the reign of London is over’. Now he was wrong about that, but I think it shows the focus of the French government and others who got the London tech scene.”

Johnson’s government has made some efforts to repair the relationship, but key figures in the community are sceptical about whether he has a genuine interest in its work. Ben Southworth remembers meeting Johnson when he was London mayor. “I tried to grab him to say the PM would really like it if you could be seen to focus on the following things. He handed me over to Kit [Malthouse, then deputy mayor for business] who said ‘what London needs is more street cleaners, it doesn’t need more ‘digital people’.’” Malthouse did not respond to a request for comment.

At an event in 2011, Southworth overheard Johnson asking a colleague, “‘do you use apps, at all? I’ve got apps on my phone, but I don’t use them. Do you use apps?’ – at which point I had to walk away, because I was feeling antagonised. His interests personally don’t really extend beyond himself or the world of classics. […] Subsequently [Johnson] did become very interested in technology, thanks to his friendship with Jennifer [Arcuri]. So, in the end, we got what we wanted. We did get the little joined-up government, but it came at a slightly different angle of attack than expected.”

James Wise is more optimistic about the future relationship between the government and tech sector. “Look at the reforms they’re trying to make around the FTSE […] and there’s been reviews of everything from visas for people of exceptional talent in the software space through to making sure that online education is available for people to develop new types of skills. So I think the momentum around the relationship between the industry and the government is strengthening.”

One source, who asked to remain anonymous, is less impressed. The executive warned that some of the boards set up to guide the tech sector’s growth appear to have been politicised. The candidate had been encouraged to apply to join the second iteration of the Centre for Data Ethics and Innovation’s (CDEI) board, alongside five other people who were thought to be a “shoe-in” due to their expertise in developing responsible technologies.

“All of us got rejected before the first interview,” the source told the New Statesman. “What we’re hearing on the back channel is it’s our personal politics that have meant that we’re not a fit.” The source said they received a text from someone involved in the recruitment process saying so much, despite CDEI supposedly operating independently of central government.

A spokesperson for the government’s digital and culture department said: “These allegations have no basis. All appointments to the board for the Centre for Data Ethics and Innovation will be made on merit following a fair, open and transparent process.”

“I think there’s a lot to be said for positive disagreements,” the source added. “I think that’s the only way you get any kind of progress. […] There’s a lot of [board] capture going on, I see a lack of skills in terms of [the government’s] tech knowledge. I can’t tell whether there’s lack of interest or lack of appetite. But what it is now is not what it was 10 years ago.”

Over the last decade, London’s tech sector has outgrown Shoreditch and stretched out across the capital. Canary Wharf is home to one of Europe’s largest fintech accelerators. The Olympic Park hosts a government-funded incubator for cyber startups and Kings Cross is home to Google and its AI subsidiary DeepMind. Meanwhile, Microsoft’s UK headquarters are split across Victoria and Reading, and Apple is leading the regeneration of Battersea Power Station.

Some see the closure of Google Campus and Tech Hub not as proof that the startup scene is failing, but that it has expanded and matured. And Tech Nation is now seeking to build new tech clusters across the country. Sarah Drinkwater, the former head of Google Campus, is concerned, however, that as a result of the pandemic and the rise of remote-working, it could become harder for people to break into the industry. 

“There was a certain point in time when so many VC offices moved out of Mayfair and came East. There was a time when there was just this incredible explosion of co-working spaces,” she says. “I think what makes the sort of remote work piece challenging is it tends to mean that the access that places like Google Campus bought – the kind of diversification of networks – moves online, and I worry about the [implications of that…]. I see a challenge around mentoring and how people come together and learn.

“I don’t think that’s really being served in the same way now that it was 10 years ago. There is this explosion of content on the internet, but it’s not very well curated. We don’t really know where to go to find the right thing. For now the pendulum has swung away from having a physical hub, but I have a feeling that in time there’ll be many physical hubs across the UK that might look a little bit how Shoreditch did ten years ago and will be a lot more diverse and a lot less London centric.”