Tech giants' talent poaching leaves Tech City's startups stranded

Small- to medium-sized companies around London's Old Street roundabout in Shoreditch are failing to achieve their full potential as tech giants are snapping up the best talent, according to a recent report.
Written by Sam Shead, Contributor

London's Tech City is being held back by a shortage of coders and developers and a lack of access to funding, new research has revealed.

The Tech City Futures report — produced by independent research firm GfK on behalf of the online publication TechCityInsider and released on Monday — found that 44 percent of the 141 businesses surveyed in and around Shoreditch, Hackney and Stratford saw a lack of skilled workers as the biggest challenge to growing their business.

The businesses surveyed can be classed as digital, hard tech, e-commerce, app developers, media or entertainment.

Of those surveyed, 90 percent said that coders and developers were the hardest roles for which to attract new recruits. User experience specialists and research and development staff were also in short supply, with 84 percent and 78 percent of businesses respectively claiming these roles were "fairly/very difficult" to fill.

"You've got the early beginnings of a country starting to develop these skills, but Tech City is growing really quickly," GfK research director Ryan Garner told ZDNet.

He said that 77 percent of businesses in the survey claimed that a lack of access to skilled workers was restricting their growth.

"In two or three years time you'd like to think that these problems will be starting to ease a little bit," Garner said, adding that initiatives such as introducing Raspberry Pi computers to schools and building new links between universities and industry would help create a new generation of developers.

One of the reasons for the shortage of technically-minded people in the Tech City area is that large organisations such as Google and Amazon are poaching the best people, according to Garner. 

However, he believes that as larger firms settle in to Tech City, smaller firms will start to see more of a two-way flow of talent.

In the meantime, 42 percent of Tech City businesses said they were finding it somewhat or very difficult to retain their best employees.

This is contributing to a lack of skilled workers and forcing 94 percent of businesses to employ temps, freelancers and interns. "If you've not got that permanent base of talent in a core team to build a business on, then you're going to struggle," Garner warned.


Businesses in Tech City claim that they are also being held back by a lack of access to funding, with 29 percent of business leaders arguing that they are missing out on valuable opportunities to expand as a result.

The companies struggling to get investment were the ones seeking Series A funding of between £500,000 and £2m, Garner said.

"When you break down the types of companies having these problems it's the smaller companies with an annual turnover under £1m," he said. "You might have the best idea in the world, but if you're not generating turnover you're seen as much more of a risk, so you either give up a large equity stake in your company or you don't get the funding."

Venture capitalists and private investors were a lot more hesitant to take risks in London than they were in the likes of California's Silicon Valley, he said. "I think it's probably the growing pains of Tech City. Things just need to bed in a little bit longer."

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