MP Matthew Hancock fails to justify Silicon Roundabout | Video

World Finance interviews MP Matthew Hancock to discuss whether the government's tech city, Silicon Roundabout, has lived up to expectations

May 12, 2014

The government’s tech hub, Silicon Roundabout, was hailed as an instrument that would boost employment and drive innovation in London. But has the initiative lived up to expectations? MP Matthew Hancock talks to World Finance about the impact Silicon Roundabout has had on the UK’s economic prospects, if data accurately reflects the project’s success, and whether entrepreneurship can branch out of the capital to other regions.

World Finance: It’s been about three years, Minister, since we had Tech City first officially launch, do you think it has lived up to its hype?

Matthew Hancock: Well, it’s been a big success, there’s no doubt about that. In terms of the numbers of jobs in tech in London, they’ve almost doubled over the last three years or so. They’ve provided for about a quarter of the total jobs growth in London. So measured on jobs, which is one of the most tangible ways to measure this, it’s been a success.

In terms of the numbers of jobs in tech in London, they’ve almost doubled over the last three years

World Finance: I just want to take a look at the Tech City numbers, if you wouldn’t mind, these are press-release from 10 Downing Street. As you can see, 15 tech companies in 2008, topping the chart for new business generation in the UK for 2013, with more than 15,000 start-ups. I was able to speak with your press, which made clear that the 15 tech companies came form observational data by the person who actually coined the term Silicon Roundabout. The 15,000 came from an accountancy firm which said those numbers are not only tech companies, but a wide range of business in the area. Do you think that’s the best way to perhaps substantiate the claims in terms of success for the government?

Matthew Hancock: I think there’s loads of different ways to do it. Jobs is one way. The numbers of companies is another, and the other is the use of office space in that part of London. But what really matters is getting the dynamic growth, getting companies moving to Britain, and we’ve seen some of that happen to.

World Finance: But is there any way of providing perhaps an accurate assessment of the lifespan of some of these companies? Considering that you and I can today decide that we want to start companies, establish them in Tech City, and perhaps mine could be a hot-dog business, yours could be a tech company. That doesn’t necessarily lend itself to more growth in the region.

Matthew Hancock: Sure, of course. There’s many different types of company, these things inherently move quickly, change fast, measuring them is always difficult. That’s why the first measurement I resorted to was jobs, because they’re pretty tangible and pretty reliably measured. So you measure the economy as best you can. The economy is a complex beast. Of course measurement is an issue, but that shouldn’t take away from the fact that there’s very clear expansion, and there’s clearly companies moving in from overseas, and there’s clearly a vibe on.

What drives policy is, what can we do to make the lives of entrepreneurs easier in Britain as a whole

World Finance: Some of the big issues that entrepreneurs have told me are the talent shortage, that’s just one of many, including the opportunity to have VCs at the mid-stage level, offering up millions of dollars of investment, and something as basic as even enough intranet support. These are areas where governments can really prove themselves as very capable in supporting the infrastructure. But if those are some of the issues that are stymieing success, do you think that the government has done enough?

Matthew Hancock: This is exactly why we have this focus on Tech City. You bring together the different players, and if there’s a problem with broadband, it may well be that the solution can be, financially, a private sector one, with a company like BT coming in to provide the answer. But if there’s a direct line into government, they can pick up the phone and say, look, we’ve got a problem with broadband in this area in London in Tech City, we need you to fix it.

World Finance: Standard Industrial Classification code, notoriously difficult to track the successes of technology business in particular across the UK. But I attempted to do so, and actually I was looking at Tech City companies, 10,000 of which had a turnover of £2.47bn. Cambridge companies: 4,000, turnover of £6.15bn. If you calculate the average turnover per company, £247,000 for Tech City, whereas Cambridge had £1.54mn per company. Just based on that raw data (provided by DueDil), wouldn’t you say that Cambridge in many ways is more effective in driving the economy forward?

Matthew Hancock: I think there’s lots of things that go into those sorts of calculations, and in a sense there’s no need to make the comparison. It’s interesting, the comparison, but it doesn’t drive policy. What drives policy is, what can we do to make the lives of entrepreneurs easier in Britain as a whole.

World Finance: We had a chance to sit down with a leading figure in the tech community, Hanadi Jabado, she is with Cambridge University, and she is one of several voices who feel neglected, frankly, by the federal government. The say all the focus has been on this marketing machine that’s propped up Tech City, when there is a lot of efficiencies of scale and lots of opportunities and jobs being created in Cambridge. What do you say to that?

[W]e’re doing everything we can

Matthew Hancock: Well, as I say, the fact that there’s lots of different bits of the country competing to be the best at creating jobs, as a Minister for the whole country, that is a good thing. And as I said, this spread, after the success of Tech City, spreading that concept to other parts of the country is something that we are actively doing, I mentioned Manchester, Cambridge is another place that clearly can benefit from that. Actually, I’ve been in Cambridge recently with the Prime Minister talking to the tech hub there, they certainly get my attention.

World Finance: But a lot of the campaigns, as I’m sure you’re aware, Tech City, that website alone is very much focused on the London example, but people who are fuelling it are tax payers from across the country. Don’t you think there should be more of a marketing machine for the rest of the country?

Matthew Hancock: Absolutely, get in touch. We’re at the moment going through a process, striking growth deals with every local enterprise partnership in the country, covering the whole country. In order to listen to what people want locally, and to see how we can put that into practice. The enterprise investment scheme is a really popular one, in the latest budget we made the seed enterprise investment scheme, the smaller-scale version. We made that permanent, we brought it in for a couple of years to see how it went, and we’ve made that permanent.

World Finance: Do you think the government’s done enough to support the other hubs equally?

Matthew Hancock: Well we’re doing everything we can, and we’re going through this process now, we’ve struck some city deals with particular cities, like Leeds for instance, Manchester as I mentioned, also Birmingham and then some of the smaller cities, including Ipswich, and a total of 38 cities I think. Now we’re spreading that to make sure it covers the whole country through the local enterprise partnerships.

World Finance: Minister, thank you so much for joining me today.

Matthew Hancock: Pleasure.