Many people feared London was doomed in the wake of the global financial crisis a decade ago. The financial industry, it’s main growth engine, was on its knees and its property market was in a slump.
But rather than sinking, the crisis paved the way for London to generate another decade of growth and prosperity.
The downturn freed-up skilled and business-minded talent from the confines of the City and gave them the opportunity to reinvent themselves as entrepreneurs, at discounted property rents.
Fast forward to the present day. London’s tech ecosystem has reshaped the job market and the city as a whole, driving new property development from Shoreditch to Kings Cross and Canary Wharf, where fintech accelerators and burgeoning scale-ups are filling office space left vacant by financial companies. Other global financial centres such as New York and Hong Kong have undergone similar developments.
In a recent conversation with an executive from a national investment promotion agency I was surprised to hear them say their focus was on attracting big industrial groups “because they create jobs”. In fact, data suggests tech start-ups and scale-ups created most new jobs over the last ten years.
This trend looks likely to continue in the post-Covid ‘new normal’ that lies ahead.
Automation uptake is accelerating fast, and the metrics are already staggering. Taiwanese chip producer TSMC, for example, is investing up to $12bn in a new foundry in Phoenix, Arizona, in one of the biggest manufacturing projects tracked by fDi Markets.
The job dividend is pretty low, however, with 1,600 new jobs due to be created over the next decade. To put this in context, London-based fintech sensation Revolut plans to hire 3,500 people worldwide in 2020 alone.
It’s true, of course, that TSMC and Revolut are exceptions and comparisons may be misleading. Moreover, each territory plays to its strengths, and promotes investment and job creation where it feels it has a comparative advantage. However, while automation will allow manufacturers to bring back investment, and a few jobs, closer to final customers in Europe, the US and elsewhere, I suspect it is the digital economy that will drive economic recovery and job creation in the ‘new normal’.
Start-ups will be at the heart of the recovery. They could create 1.2 million new jobs by 2025 in the UK alone, according to recent estimates by the Centre for Economic and Business Research.
And it’s not just about London any more. New models of remote working have the potential to redesign the country’s job market, fostering development and innovation away from the capital.
The same can happen everywhere, even where it has been traditionally difficult to retain capital-hungry talent. Countries like Estonia have been successful in bridging the funding gap in their domestic markets to give its start-ups a reason to stay put.
At the height of the ‘great lockdown’ in April, Michael Freeman, a California-based psychiatrist who has extensively researched the mindset of tech entrepreneurs, wrote to me the following:
“Creating new jobs is one of the things that entrepreneurs do best. You may wonder, how can we do this when the economy is dead? I don’t know the answer, but I do know this. If it weren’t for our creative imaginations, the economy would always be dead.”
It will take creativity, as well as a great deal of resilience, for tech entrepreneurs to get back on track following the dark months of the Covid-19 crisis. They have already proved they have what it takes to do so in the aftermath of the financial crisis. They have to prove it once again, and the countries that put tech entrepreneurs in a position to flourish may well come out of the Covid-19 crisis stronger, exactly like London did ten years ago.
Published in the June/July issue of fDi Magazine.