Cheap office space makes Silicon Roundabout go round

A report on the development of a high-tech business cluster in East London holds valuable lessons for any local authority interested in promoting high-tech growth in their area - not least that clusters can become the victim of their own success as once cheap workspace becomes unaffordable.

The coalition government has been keen to encourage the rapid expansion of this high-tech business cluster, linking its growth to the development of East London a bit further out by the Olympics and Paralympics.

The cluster emerged in the 1990s as a hub for web designers and dot-com entrepreneurs in the capital seeking cheap office space in the deserted warehouses around Shoreditch and Clerkenwell (in those days the area, centred on Old Street Roundabout, was called Silicon Roundabout, one of a series of chip-themed areas of the UK including Silicon Fen, Silicon Beach, Silicon Shipyard and Cwm Silicon).

Now under the zappier title "East London Tech City", the district boasts a Google "campus" where yesterday, the Centre for London - a new think-tank being incubated inside parent left-leaning think-tank Demos - launched a report on possible futures for the area.

One of the keys to the area's continued success where local and central government could play an important role is the provision of affordable workspace, the report said. Ironically, this is more of a problem the more success the area generates.

Local authorities ensure local plans explicitly encourage the provision of affordable and shared workspace, supplementing National Planning Policy Framework clauses on change of use, the report said. Local and central government should also explore the potential for converting empty buildings that they own in East London into workspaces, tendering management to professional shared space providers; and government should encourage the provision of affordable workspace by modifying its existing Business Increase Bonus scheme to offer additional subsidy when planning permissions for affordable space are granted.

The report is less than enthusiastic about the government's plans to push the cluster eastwards towards the Olympic Park, however.

The government and Greater London Authority should "temper their efforts to attract digital employers and workers to the Olympic Park and its surrounding areas, where it distracts from the primary aim of helping small and medium-sized businesses and nurturing entrepreneurs" [in the existing cluster], it says. "London firms feel little connection with the Olympic Park, which is seen as distant, inaccessible and with no obvious connections to the Shoreditch community."

One entrepreneur quoted in the report went further, suggesting: "I think it is the government's way to get more money into the Olympic Park without saying 'we're putting more money into the Olympic Park'." Another anonymous contributor said: "It feels like the kind of thing where there'd be a first- user disadvantage to that space. There'd be a worry that you would be moving out onto a tumbleweed strewn cul-de-sac, and would be cut off from the vibrancy, etc associated with this particular area. So I suppose it will come down to financial incentives, but I don't know whether or not that will be enough."

The report concludes the Olympic area "does have some potential as a location for digital industry in the years to come, especially for larger firms who may have trouble finding suitable space in Shoreditch and surrounds... However, inner East London is part of a digital economy 'corridor', with many other ready-to-go locations for firms looking to relocate.

"Our interviews indicated limited willingness to go further east, especially into Stratford. It may take many years before these neighbourhoods become as attractive to digital economy firms as the current cluster core, if ever. The history of master-planning clusters suggests the chances of success are limited."

Demos www.demos.co.uk