Lack of access to funding and a serious skills gap are hampering growing in London’s Tech City, a report has shown.

Friday 24 May 2013

IT contractors could find their next assignment in Tech City, as it appears that an acute skills shortage in London’s expanding technology hub is hampering growth.

GfK’s Tech City Futures Report shows that of the 1,350 businesses based in London’s technological heartland, 45 per cent say that attracting the best talent with the right skillset is the biggest challenge that they face. The problem is so severe that it is actively holding back growth in the digital industries, with more than three-quarters openly admitting that they could be growing faster if they had access to more highly skilled workers.

Most businesses in Tech City have some vacancies that they are unable to fill. The researchers identified that the top five skills in the highest demand among these employers were coding and development, user experience, marketing and public relations, business development and web design completing the list.

But some of those roles were easier to recruit for than others - on a separate scoring system, coders and developers were also the most difficult type of professional to recruit, but user experience specialists and those with research and development expertise were not far behind.

Once companies have been lucky enough to find the right staff, they tend to struggle with keeping hold of their top talent - possibly as a result of the stiff competition between firms. More than four out of ten companies said that staff retention was a real problem for them - and since most of their recruitment activity was devoted to replacing the workers they had lost, many employers were not in a position to expand as they would have liked.

In the face of this severe skills gap, contractors are being called upon to meet demand. More than nine out of ten technology firms said that they used freelance staff, as well as other temporary resources such as interns - and nearly a fifth said that they preferred using contractors over hiring temporary staff.

"It is no surprise that startup businesses rely on freelancers for flexibility and to help manage costs - and there are some excellent freelancers in the UK,” says Mike Berry, regional director of specialist digital recruiter Vitamin T. “Many of the Tech City businesses we work with are continuing to use freelancers because they cannot find those skills in people to hire on a permanent basis."

For many tech companies, one of the reasons they could not commit to hiring permanent staff was a lack of access to finance. Two-fifths of companies had tried to refinance, but a quarter of them had faced problems in doing so, whether that was the length of the process, investors and banks who were unwilling to take a risk on a new or young venture, or just a flat refusal.

Difficulties in finding funding were holding up growth all across Tech City: nearly three out of ten companies said that they believed they were missing opportunities to grow because they could not raise sufficient funds. Worse, almost one in five were actually making workers redundant as a result of financial constraints.

By Victoria McDonnell

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