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Will the Covid-19 crisis accelerate a shift in tech talent out of London?
As the coronavirus pandemic has forced firms to work more flexibly, threatening traditional large office spaces in London, will tech talent make a long-term shift away from the capital?
Barclays boss Jes Staley sent shockwaves through the banking industry at the end of April, when he said that big, expensive city offices “may be a thing of the past”.
The Covid-19 lockdown situation was leading to a “long-term adjustment” of the bank’s “location strategy”, he explained, as it re-evaluated just how much office space was actually required when 70,000 of its staff around the world were able to work from home.
Jonathan Ratcliffe, lead broker at serviced office provider Offices.co.uk, then added fuel to the fire by declaring that “we’re witnessing the biggest shift of a generation”, as huge, centralised HQ buildings start to be replaced with a “new culture of flexible working and regionalisation of office space”.
Such findings were also backed up, expressly in a tech context, by the findings of a recent CWJobs report, UK Tech Hubs: Redefining the nation’s tech innovation map, based on a survey of 1,000 tech workers and 500 IT decision-makers. It revealed that better digital and physical infrastructure, which includes faster broadband, was already leading to the creation of tech hubs outside of London – a trend that will undoubtedly be accelerated following lockdown and its wholesale shift to remote working.
Even so, while 46% of tech workers declared the capital as the top location in which to work, a huge three quarters of those based in the Greater London area – and who were questioned even before the pandemic struck – indicated they were likely to relocate over the next three years due to the capital’s high cost of living (52%), difficulties in getting onto the property ladder (32%) and too much travel (30%).
Top of the list of places to relocate to among both IT decision-makers (27%) and IT workers (20%), particularly if the aim was to launch a new business, was Manchester. Other favourites included Birmingham, Bristol and Leeds.
So does all of this imply that a mass exodus out of London is now imminent and if so, what is such a shift likely to mean?
Mass exodus or trickle?
Shamus Rae, founder and chief executive of Engine B, which provides information modelling software to the professional and legal services industries, believes that between 40-50% of tech workers will depart the capital over the next two years now that the stigma of working from home has largely disappeared.
“The crisis has accelerated trends that were happening already and unblocked barriers to where jobs can be done,” he says. “The lack of trust issue has now gone as employers have had to trust people to work remotely during lockdown, so they’ve been forced into accepting it.”
Although the company itself is retaining an office in London as most of its customers are still based in the capital, Rae says its requirements have changed markedly since lockdown. As a result, it is now seeking a smaller property that is “more of a drop-in place to meet clients” than a “big, corporate, grown-up office”. “We’d rather people worked from home as a default and used the office as a place to create social bonds,” he says.
But the firm is also continuing with plans to set up another site in Glasgow, a spot it opted for over other possibilities, Belfast and Cardiff, due to the high availability of data science and graphics skills there.
“When deciding where to set up, you start with people, people, people,” he says. “It’s about the availability of skills and talent that can understand the values and purpose the company’s trying to create, but having access to the necessary digital infrastructure and bandwidth is important too.”
Bev White, chief executive at recruitment consultancy Harvey Nash, on the other hand, is not so sure that tech workers are going to start migrating from London in droves any time soon. While she does expect some to up sticks, she believes it will be in “ripples that are consistent and will gain momentum as confidence grows” rather than a big wave all at once.
But even then, she says: “By no means everyone will go. Many people love city life and will never move out. And even if they live in places that are commutable like Reading or Guildford, they’ll still come into offices that are located in London.”
London as the epicentre
As a result, White does not predict the capital will suffer a huge brain drain. Instead she forecasts that any migration will be “slow and steady” and take place with the blessing of employers who no longer see the need for staff to be in the office for a full five days per week but are happy for them to work partly from home.
White also believes that a new focus on finding the best rather than the closest talent, which is already leading to a widening out of hiring search zones, will benefit employers by providing them with “more choice and access” to skills around the country. In other words, any such migration will not damage London’s tech sector per se but will instead benefit the UK tech industry and economy as a whole.
Andrew Roughan, managing director of Plexal, a co-working space and start-up accelerator in East London, agrees. While he acknowledges the capital has problems with a lack of affordable housing, he does not expect tech workers to start relocating in their droves as a result. After all, he says, London is still the UK’s biggest and most dynamic of the country’s tech hubs and is “the epicentre around which people coalesce”, not least because of the “availability of talent and the cultural experience of living there”.
Moreover, US internet giants, such as Amazon and Google, that have made their home there and are huge employers, have either purchased large properties or entered into long-term leaseholds. This means that, even if they wanted to, they are unlikely to abandon the capital any time soon. At the opposite end of the spectrum, start-ups often base themselves in London to be near to customers and funders, which includes angels and venture capitalists.
“So London will retain its magnetic force as a result, and all the ecosystems in and around the capital will keep it in a healthy state going forward,” says Roughan.
As an aside, the CWJobs report does indicate that the capital tends to be most favoured by younger people (16 to 24-year-olds) at the start of their careers, who describe it as the number one place to work (54%). But enthusiasm appears to wane somewhat as workers gain in years and experience, and presumably their priorities shift – while around 49% of 25 to 44-year-olds are similarly keen on London, the figure drops to only just over a third among the over 55s, a situation that could over time lead to more marked demographic splits than currently exist already.
As to what a new, more devolved tech talent landscape might look like, meanwhile, Harvey Nash’s White believes it could well be more nuanced than it is today as the “working from anywhere idea” takes more hold.
The importance of regional hubs
Although hubs will continue to grow in already popular, large urban areas, such London and Manchester, other smaller ones are also likely to develop in areas with good broadband and transport infrastructure, such as Sheffield and Derby. Local “micro-hubs”, in which remote workers from different organisations share workspaces, will likewise add another increasingly important layer to the mix. Indeed, believes Plexal’s Roughan, the progressive emergence and scale of provincial tech hubs, which includes co-working facilities, is likely to prove vital in future if the UK is to succeed in positioning itself as a tech leader on the global stage.
The Tech City movement has already supported the emergence of new hubs in locations such as Newcastle and Belfast, he points out, while local universities in places like Cambridge and Edinburgh have led to clusters of start-up companies specialising in particular fields.
But macro-economic initiatives are also helping too. For example, the creation of the Northern Powerhouse has become a “magnet for startups to coalesce around” as investment has poured into the region along with the development of supporting infrastructure, says Roughan.
Rather than viewing such moves as a threat to London’s supremacy, he views them more of a complement to its existing strengths. For example, one of the specialisms of his own accelerator, which focuses on supporting start-ups that sell their wares into the private sector, is cyber security. But Plexal has also begun collaborating with CyNam, or Cyber Cheltenham, a growing cybersecurity hub located in the home of GCHQ, where young companies target the government marketplace.
“We believe that working together and creating twin ecosystems like this is a sound model going forward,” says Roughan. “It’s about looking at the magic dust locally and fulfilling that potential to scale.”
Such activity does not pose a threat to London though as the capital is so diverse and has such a wide talent pool that “you don’t need to find compelling reasons to go there as they’re self-evident”, he says.
“What the Covid-19 crisis has proven is that economic growth will probably need to be the priority of the next decade, so the focus has to be on how to align the national effort around national growth,” says Roughan. “This means it’s important that tech talent is not randomly scattered around the country but that the whole economy is able to benefit from regional specialisms sitting alongside London.”