This website uses cookies  Cookies enable us to understand how visitors use our website so that we can improve it and provide the best experience possible. By browsing our website, you agree to our use of cookies. Learn more
Back to press release overview

Press Releases

20 May 2013
Tech City growth stunted by talent shortage and lack of access to capital
The results of the most significant survey of London's tech business leaders to date are published today, marking the start of the Digital Shoreditch festival. Almost half (45%) of Tech City’s 1350 businesses* say a shortage of skilled workers is the biggest challenge they face. And nearly eight out of 10 (77%) say they could grow faster if there were more skilled people available. http://bit.ly/16E6Y2O
Key findings:
  • Finding the right talent and keeping it is a major challenge for many Tech City businesses. 77% could grow faster if there were more skilled people available
  • 33% believe their business is being hindered by lack of access to capital
  • Tech City may be well known, but “more infrastructure, less hype” is the message from businesses for it to become a force in the global tech sector.

These findings come from the Tech City Futures Report, produced by GfK for leading technology business publication TechCityInsider.net and its partners City University London, Grant Thornton, Vitamin T and Digital Shoreditch.

Finding and retaining the right talent impacts almost all Tech City firms

The majority of Tech City businesses have vacancies they can’t fill. The top five skills most in demand are: coders & developers, marketing & PR, business development, web design and user experience specialists. For each skill, GfK provided a Difficulty Rating to understand which skills are the hardest to find. Coders & developers topped the list at 90, followed by user experience specialists at 84 and research & development at 78 (Chart 1 - download full pdf for chart).

Andrew Huddart, Strategic Partnerships Manager, City University London, said: “The talent challenge revealed by the Tech Futures Report shows how tough it is for firms around east and central London to get the people they need to move to the next level. In this survey they have sent a message to all of us involved with talent and skills in London that they want to hire permanent staff with the right kind of qualifications.”

However, it’s not just recruitment but staff retention that is also a challenge. Tech City firms have recruited six people on average over the past year, but further growth is hindered because much of that activity has been to replace talent they have lost, rather than to create new jobs to support business expansion. 42% of Tech City businesses find it somewhat, or very difficult, to retain their best talent.

This skills gap is being plugged by temporary resource, including freelancers and interns. Almost all (94%) of the business leaders interviewed say they use temporary staff in their business - but only 17% prefer to do so.

Mike Berry, regional director of specialist digital recruitment business Vitamin T, said:

"It is no surprise that startup businesses rely on freelancers for flexibility and to help manage costs - and there are some excellent freelancers in the UK. Many of the Tech City businesses we work with are continuing to use freelancers because they cannot find those skills in people to hire on a permanent basis."

Accessing capital is holding back a third of Tech City businesses

A third of Tech City business leaders say their business is hindered by a lack of capital, whether sourced from investors or banks. The result is that almost one third (29%) believe their company is missing significant business opportunities to expand. 19% say they are making people redundant.

Tech City firms use on average 3.4 sources of finance with angel investors, venture capital and borrowing against personal assets being the most popular (see Chart 2 below). As these Tech City businesses grow, they need further injections of capital to support marketing and business development efforts, technology development and international expansion. GfK’s research shows that of the 43% of firms that have raised further capital, almost a quarter (23%) had problems, from the length of time it took, to investors/banks unwilling to take a risk, to a straight refusal for funds. 

Steve Leith, who heads up Grant Thornton's early stage technology team in Tech City, said: "Many of the startups around Tech City may be early stage, but they are tackling complex funding requirements to fuel rapid expansion. Whilst there is an increasing flow of angel capital, we see a growing gap for businesses requiring investment of £500,000 to £2 million. This is in stark contrast to the development of the funding community in the US where the cycle of tech entrepreneurs reinvesting in startups is fully developed and the VC community has a greater appetite for risk. UK Government-supported initiatives such as the MMC London Fund and GrowthAccelerator may prove part of the solution, but more will be needed to fulfil Tech City’s potential, and avoid a loss of talent and investment opportunities to the Silicon Valley dollar."

From Silicon Roundabout to the global technology sector

Tech City’s business leaders have mixed feelings about the effectiveness of the UK Government’s support so far. Whilst there are positive feelings about the area for encouraging young businesses, gaining support from Google and other large technology firms, and London’s tech sector overall, others feel there has been more PR than action from Government. This ‘hype’ is seen as negative - pushing up rents and salaries, and attracting global firms that have poached the best talent.

Typical of the comments from business leaders are the following responses:

“London and the UK lack a deep talent pool of senior executives with relevant high growth / startup experience. We've found sourcing world class C-level hires consistently challenging, and have had to resort to relocating people from the US.” CEO/Founder of e-commerce business with 100-249 employees

“There’s lots of angel investing, but once a company bursts through there is no one to catch the company and propel them into a world class company. I am forced to look towards the US and the Far East. This is a disgrace for this country and means that we are unlikely to build the technology Titans of tomorrow to match the likes of ARM, Imaginations Technologies and Sage.” CEO/Founder of a social ecommerce company with 20-49 employees

Ryan Garner, Research Director for GfK said: “This finding in particular highlights the ecosystem of entrepreneurship and how vitally important it is to have all the elements in place – business leaders with vision, skilled employees to create and bring products and services to market, investors willing to take risks. 8.3% of Britain’s GDP comes from tech, and that is expected to rise to 12% by 2016. Our research shows Tech City is at a tipping point, and hopefully this report will help it find its way in spearheading that economic growth.”

TechCityInsider.net’s Editor Julian Blake said: “The key message in the report is that there aren’t enough skilled developers out there to meet demand. This means startups are turning to temps, interns and recruitment from overseas as they lose out to the City and the US in what amounts to a new tech brain drain. We’re also hearing very mixed messages about the role of Government. While many applaud the Tech City initiative for promoting the area and attracting big US corporates like Google, others are sceptical, believing that the Government is trying to take the credit for an economic success story that was happening anyway.”

Ends

 
Download the full report here: http://bit.ly/16E6Y2O

 

For press enquiries please contact: Greenfields Communications

Lucy Green lgreen@greenfieldscommunications.com T: 07817 698366

Kevin Maxwell kevin@greenfieldscommunications.com T: 01225 426 201/M: 07985 351 797

Wes Rogers wrogers@greenfieldscommunications.com T: (0) 203 287 3262 (from 1pm)

Notes to editors

GfK interviewed 141 Founders, Chief Executives, Managing Directors, Chief Operating Officers and top-tier managers online between 25 March and 12 April 2013. In total, 77% of respondents were CEO/Founders of the business they represent. Companies were sourced from TechCityInsider’s subscriber list of companies operating in the London tech sector. In terms of the businesses represented, 30% had an annual turnover of <£200k, 34% £200,000-£999,000, 17% £1-£5m, 7% £5-£10m and 12% over £10m. 24% said their main location of business was London, 44% UK, 17% Europe 14% North America and 1% ROW. The research approach was specifically designed to include the business leaders who will define the next generation of creative digital businesses in and around London.

*The number of businesses in Tech City is based the figure provided by Tech City Investment Organisation (TCIO) which is 1350. www.techcityuk.com/  Using this figure, the survey suggests that roughly 607 technology businesses are finding the skills shortage their number one problem. Our sample is not just hard tech companies but includes the ecosystem of businesses growing up around Tech City including “digital first” firms  such as travel companies, recruitment agencies, digital media, social media etc.

About the strategic partners

The research was commissioned by TechCityInsider and carried out independently by research company GfK. The strategic partners were City University London, Digital Shoreditch, Grant Thornton and Vitamin T.

About City University London

City University London is a global University committed to academic excellence, with a focus on business and the professions and an enviable central London location.  It is in the top five per cent of universities in the world according to the Times Higher Education World University Rankings 2012/13 and in the top thirty universities in the UK according to the Times Higher Education Table of Tables 2012. It is ranked in the top 10 in the UK for both graduate-level jobs (The Sunday Times University Guide 2013) and starting salaries (Which? University Guide). The University attracts over 17,000 students (35% at postgraduate level) from more than 150 countries and academic staff from over 50 countries.  Its academic range is broadly-based with world leading strengths in business; law; health sciences; engineering; mathematical sciences; informatics; social sciences; and the arts including journalism and music.

The University’s history dates back to 1894, with the foundation of the Northampton Institute on what is now the main part of City’s campus. In 1966, City was granted University status by Royal Charter and the Lord Mayor of London was invited to be Chancellor, a unique arrangement that continues today. Professor Paul Curran has been Vice-Chancellor of City University London since 2010. For more information http://www.city.ac.uk/

About Digital Shoreditch

Digital Shoreditch celebrates the outstanding creative, technical and entrepreneurial talent of East London and Tech City. It runs monthly meet-ups, a huge festival of the most talented digital and technical creatives, connects brands and buyers to its members, and runs a comprehensive directory, hackathons and other competitions. For Digital Shoreditch 2013 festival it is turning Shoreditch Town Hall into an extraordinary digital playground between Monday 20th and Sunday 26th May, with the community programme the following week, running until Friday 31st May. http://digitalshoreditch.com

About GfK

GfK is one of the world’s largest research companies, with more than 13,000 experts working to discover new insights into the way people live, think and shop, in over 100 markets, every day. GfK is constantly innovating and using the latest technologies and the smartest methodologies to give its clients the clearest understanding of the most important people in the world: their customers. In December 2012, GfK won the coveted award for ‘Best Research Agency with a turnover of £20m in the UK by the Market Research Society. To find out more, visit www.gfk.com/uk or follow GfK on Twitter: https://twitter.com/GfK_en

About Grant Thornton

Grant Thornton UK LLP is a leading business and financial adviser with offices in 27 locations nationwide. The firm is a member of Grant Thornton International Ltd, one of the world's leading organisations of independent assurance, tax and advisory firms with over 35,000 people, across 100 countries. We help dynamic organisations unlock their potential for growth by providing meaningful, forward-thinking advice through a broad range of services. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to solve complex issues for privately owned, publicly listed and public sector clients.  

Grant Thornton is firmly focused on helping dynamic, innovative and entrepreneurial companies grow and playing an integral part at the heart of Europe’s most important start-up and technology scenes. Our dedicated technology and innovation practice has an enviable track record of working with successful and dynamic technology companies at all stages of their life cycle, to support their ambitions for growth. We are one of the leading players in transactions in the sector and have an unparalleled knowledge when it comes to supporting young and dynamic teams and companies in their ambitions to grow. We provide a full suite of services to high growth companies and the entrepreneurs behind them, covering advisory, taxation and assurance. This gives us a 360* view on their needs across their lifecycle and enables us to be a long term partner helping them deliver on their ambitions. We have a genuine passion for media & technology businesses that shapes how we work and who we know.  www.grant-thornton.co.uk

About TechCityInsider.net

TechCityInsider.net is the leading source of information for about London's creative digital business. It is published by C21Media, one of the world's most progressive digital publishers and a founding 'Tech City' company.

About Vitamin T

Vitamin T connects the best digital creatives in the industry and provides carefully screened freelance designers, developers and copywriters on a freelance and Talent Bridge basis. Vitamin T has been doing this for over 25 years as part of Aquent, so its talent network is unparalleled. Vitamin T personally meets with candidates, uses proprietary hands-on assessments, and digs down to find out what its talent can do – and what they want to do – so that it can make the perfect match for its clients.www.vitamintalent.com

Contact Us

Richard MorlandUK, Marketing and Communications