UK government acknowledges growing role of business clusters
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Chancellor Gordon Brown's decision in his 2000 budget to set aside 50
million pounds for promoting "business clusters" reflects the increasingly
important economic role played by dynamic local hubs of interdependent yet
competing firms. It's not the first time that business clusters such as the grouping
of creative and new media companies in London's Shoreditch have attracted
public support. Business clusters as diverse as Silicon Fen in
Cambridge and Coventry's hub of car components manufacturers have previously
benefited from UK urban regeneration funding, or support from European Union
structural funds. However, money from these sources is usually conditional upon
attaining certain employment targets or offering training schemes to local
communities. In contrast, contributions from the government's new cluster fund
do not hinge on specific commitments of this kind. London is to be allocated around 4.8 million pounds of the total over
the two years to April 31 2002. Around 1.66 million of this is to be spent
during year 1. The creative media hub in and around Hoxton is expected to be
one of the chief beneficiaries. Specific projects requiring cluster fund support are to be selected
by the London Development Agency, with the Department of Trade and Industry
giving the final seal of approval. Only projects aimed at investing in or
upgrading capital assets, including buildings and office space, will be
shortlisted. In the first two years, the fund is to focus mainly on
biotechnology, manufacturing, and design. The idea is to use the money as a catalyst, said Mark
Crane of the London Development Authority. Priority will be given to
projects that have no prospect of raising money from any other
source.
He added that while the funding for year 1 is now fully subscribed,
proposals are still being sought for year 2. No deadline for their submission
has yet been set. Professor Philip Cooke of Cardiff University, a member of an expert
group which advises the government on cluster policy, said that the fund's main
purpose is to make one-off payments to help particularly worthwhile projects
get off the ground. It's quite clear the Treasury wasn't interested in recurrent
expenditure, he said.
He added that the best possible use for the money would be to invest
it in a series of incubators - buildings divided up into work
units capable of housing a large number of competing start-up firms under the
same roof. Incubators are widely thought to encourage the free flow of ideas,
and to promote best practice amongst like-minded firms. They are becoming
increasingly popular in the hi-tech and creative industries. Incubators should ideally be spaces or buildings where small
firms can be nurtured. Of course, human capital is just as important as the
buildings, Cooke added.
However, it is often difficult to find enough affordable office space
to establish an incubator, especially in urban areas. This is especially true
of Shoreditch, where the encroachment of well-heeled City firms from the south
is driving rental costs beyond the means of most small start-up firms. A ring
of social housing to the north and east of the Hoxton/Shoreditch media and
design cluster makes further expansion difficult. Matt Cridland, Senior Designer at leading Old Street-based
communications agency C - eye, itself about to relocate, says the property
squeeze has potentially serious implications for the Shoreditch cluster.
Since the City has started to creep north, we've realised what
a good deal we had here. There are still opportunities for the two to three-man
bands, but it's getting more difficult, he said
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