My cycle route to work takes me from Highbury to London Bridge. For the first third I follow a thin trail of cyclists along New North Road — a bit of the city that has not altered much in 20 years. But as I approach Shoreditch that begins to change. By time I get to the Old Street crossing I am part of a river of cyclists. Most are young and hip. The boys sport beards, jeans, tweed jackets and brogues and ride fixed-gear bikes. The girls prefer antique-looking cycles with wicker baskets. This part of the route takes me past a couple of hip coffee shops, two bike shops and a café specialising in porridge at £7 a bowl. Then the cyclists disappear as mysteriously as they arrived, and I move into the greyer, suited world of the City.
I have passed through Tech City — the centre of the digital economy that is fast transforming London. But what sort of London will it produce?
In its pioneering days, the computer industry was not a particularly urban phenomenon. The first firms grew up on university campuses and moved to science parks and sprawling suburbs — what US economist Richard Florida calls “nerdistans” like Silicon Valley. But that has changed, in part because the digital economy is fusing with other more urban economic sectors, including design, fashion, film, advertising, business services and finance.
While the digital sector does not loom as large in London’s economy as it does, say, in San Francisco’s, it has grown fast in the past decade, and nowhere faster than in east London. The outline story of the development of Tech City is now well researched. The cluster emerged slowly in the late Nineties and early 2000s, fuelled by its central location, cheap rents, urban buzz and a planning regime that permitted artists and entrepreneurs to live and work in one space. Over the past few years small start-ups have been joined by larger corporates eager to get in on the action. In truth it owes as much to the creative industries of Soho as it does to tech industries of Silicon Valley.
In a new book, The Flat White Economy, which takes its name from the preferred coffee of young entrepreneurs, the economist Doug McWilliams heralds the digital economy as London’s saviour. We have been lucky that just as London’s financial services went into decline, the capital emerged as Europe’s leading digital economy. Old ways of categorising companies don’t capture the size of the new economy, as non-digital firms employ more and more people to design their websites, put their services online and redesign business processes the for digital age.
But McWilliams says it already made up 7.6 per cent of economic activity back in 2012 and he forecasts that in 10 years it will be 15.8 per cent, dwarfing financial services. Much of this growth, he points out, has been fuelled by overseas entrepreneurs and workers beating their way to the capital.
But the new digital economy brings problems as well as opportunities. Digital clusters have tended to take off in rundown areas such as Shoreditch, in part because rents are cheap, in part because young digital hipsters like their urban vibe. But the emergence of a cluster in a poor neighbourhood pushes property prices up, so squeezing out residents. There is growing resistance in east London to the many big developers who want to move in, with the mayor of Hackney himself setting up a Save Shoreditch campaign.
More generally, digitisation is associated with the squeezing out of middle-tier jobs, the growth of freelancing and the creation of an egg-timer economy — lots of poor and lots of rich people but few in between. As Richard Florida has shown, American cities with the most developed digital economies are among the most unequal.
London needs to be thinking much more seriously and creatively about how it responds to these opportunities and challenges. If we want the digital economy to grow, we need to do a better job of supporting it, including allowing firms to recruit digital talent from overseas, and ensuring that London remains a place that young digital creatives want to live in — above all, we need more homes, different sorts of workplaces and more cycle-friendly streets.
If we want to address the downsides of London’s tech economy, we will need to think about how we can improve the quality of computing in schools, promote fair pay and a welfare system that works for the self-employed, and make sure companies and individuals making big money pay their share of tax.
In the meantime, perhaps we can turn one problem to everyone’s advantage. The flat white economy is facing a major skills shortage — it’s probably the biggest problem holding it back. But it has taken off in poor areas, with high levels of youth unemployment. Could we do more to grow local digital talent?
The think-tank Centre for London has spend the past year looking at how this could work. We have identified a fast- growing community of what we call “digital learning” programmes that have developed out of Tech City — programmes such as Code Club, Codezoners, Makers Academy and Tech City Apprenticeships. These programmes run courses and work placements that aim to help local young people develop digital skills and find work. They share Tech City’s can-do ethos and they understand its fast changing needs. Some work with school-aged children, others help train school leavers.
We argue that they are already making a big contribution to building bridges between digital firms and young people. But there is a huge opportunity to scale up what they do. The number of tech apprenticeships is tiny, way below the Mayor’s target. There is a role for schools and for government here. But above all, London tech firms need to get behind these programmes and help raise the digital workers of tomorrow.
Ben Rogers is a director of Centre for London, which tomorrow launches a report, This is For Everyone: Connecting Young People and the Tech City Cluster.
This feature is adapted from Standard.