The tendency of businesses to cluster together is nothing new: think of a medieval port city, with its streets for merchants, bankers, innkeepers – and ladies of the night – for example. But in today’s complex and fragile economy, companies and organisations of all kinds are keen to explore the opportunities that can be created if they group together, sharing ideas and skills to boost innovation.
Some have developed in an organic way, around spin-off companies created by university departments, or growing out of supply chains for a large-scale employer. Others are boosted by central or regional government intervention, often in areas in need of regeneration. Either way, what potential for innovation and economic success – locally and nationally – do they offer in the longer term?
One of the most prominent business hubs in Britain has developed around Cambridge. The city’s university has helped provide the ideas and personnel that have created a host of high-tech companies of various kinds, from wireless technology specialists to software developers and pharmaceutical or scientific research firms. It is also attracting major companies from around the world: in June, AstraZeneca announced it was moving its new global headquarters to Cambridge’s Biomedical Campus.
Peter Hewkin is founder of the Centre for Business Innovation (CfBI), which runs the networking group Connected Cambridge. He believes the university plays a key role in bringing talented people to Cambridge, while the city’s pleasant surroundings and great schools encourage them to stay; and the networks of expertise that develop naturally in a relatively small place create a fertile working environment.
Cambridge companies are more often research and development (R&D) specialists than they are manufacturers. A small company becoming successful then being acquired by a larger corporate (often a US company) has been a common story in recent decades. “It has been said Cambridge’s weakness is that it creates millionaires rather than jobs, but they then become investors in the next wave of businesses,” says Hewkin. High incomes in the city also have a trickledown economic effect, from building and gardening services to lawyers and accountants.
In some cases the benefits of cluster development can spread far beyond the original geographical location. For example, Metalysis, a spin-out business from the University of Cambridge, has set up a manufacturing facility in Rotherham, South Yorkshire, to create high-value metal powders using a new electrolysis-based method.
Creating a buzz
But in other parts of the country, additional artificial stimulation may be required to help businesses exploit available skills and infrastructure. The Aire Valley Leeds Enterprise Zone (EZ) – 142 hectares of land across four sites near the East Leeds Link Road – went live in April 2012 and aims to deliver up to £550m of economic output and 9,500 new jobs by 2025. The first company to arrive is Watershed Packaging, whose new 25,000 sq ft factory will create 40 jobs. An Innovation Health Hub, backed by public and private sector funding, will also be created in the EZ, within which companies working in R&D will be co-located with shared facilities.
However, it isn’t always the new facilities drawing in the businesses – the attractions of a location may be based on access to existing services. In 2011 pharmaceutical company Pfizer announced it was closing its research plant near Sandwich, Kent, cutting 2,400 jobs. But the large, well-equipped site was then purchased by a private consortium, renamed Discovery Park and granted EZ status. There are now 52 companies on the site, employing over 900 people. Most are working in life sciences, pharmaceuticals, biotechnology and associated technologies, but Discovery Park also houses property, legal, accountancy and PR companies, catering providers and a gym.
Accountancy firm Reeves has opened a new office at the park. “We’ve taken an office there to service existing clients and we’ve picked up a lot of those new businesses too,” says managing partner Clive Stevens, who is also an ICAEW council member. He has been struck by the benefits of working within a cluster for smaller businesses. “At Discovery Park they’re socialising together, organising events,” he says. “You definitely create a community.”
That’s important, because many people want to work somewhere with a bit of a buzz. So it is perhaps not surprising that the Bristol Temple Quarter EZ, which can boast easy access to retail, leisure and entertainment facilities, and to the pleasant countryside outside the city, is developing at a healthy rate. The Temple Quarter comprises 70 hectares, home to a range of companies, including many SMEs and microbusinesses working in technology and creative sectors as well as established brands such as BT, IBM, Canada Life and Osborne Clarke.
Nick Sturge, centre director for the SETsquared Partnership, a business incubator that helps the universities of Bath, Bristol, Exeter, Southampton and Surrey support new businesses through research and consultancy, stresses the importance of trust and ideas-sharing as means of stimulating innovation.
“We tell [aspiring entrepreneurs] that you’ll find the answers you need by taking risks and sharing information,” he says. “If you go to our games industry hub in Bristol, they sit on adjacent desks. You can tap freelancers on the shoulder and talk to them about a project. For an SME taking risks with people they don’t know, particularly if it’s outside their comfort zone, it’s very difficult to judge whether you’re hiring the right person. In this environment of trust someone might just say ‘speak to John, he has experience in that’.”
Companies can also share their experiences of working with service providers such as accountants and lawyers. They also benefit from being able to sign shorter leases, thus reducing risk. At the SETsquared facility in Bristol the notice period is only one month.
Sturge admits he had always assumed hubs and clusters would need the infrastructure provided by a city, but realised this was not the case when he encountered the Malvern Cyber Security Cluster in Worcestershire, a group of over 40 cyber security companies based across Worcestershire, Herefordshire and Gloucestershire that have gradually formalised collaboration and information sharing over the past few years.
Increased availability of digital technologies is one of the most important reasons why this kind of collaboration and clustering is now possible in rural areas. Social networking has become a hugely important means of getting information about a company into the public domain. And internet technologies allow smaller companies to work together to develop joint service offerings.
The New Anglia Local Enterprise Partnership (LEP) covers two large, predominantly rural counties: Norfolk and Suffolk. Areas of focus include energy, for which East Anglia is arguably the second-most important centre in Britain, with existing oil and gas company activity around Great Yarmouth and Lowestoft now complemented by green energy companies and related supply chain companies.
Low-carbon innovation is another priority, drawing on local resources such as the Climatic Research Unit at the University of East Anglia (Norwich). The LEP is hoping to encourage further development of an ICT cluster developing around BT’s research facility at Martlesham Heath, not far from the new University of Suffolk’s waterfront campus at Ipswich. Ipswich town centre is also in need of reinvestment, so the LEP is looking at ways to help some companies relocate there.
“This is predominantly a rural economy, but we have close proximity to London, to the East Midlands and to Cambridge,” says Iain Dunnett, operations manager at the New Anglia LEP. “And as rural broadband gets rolled out we’ve found a desire among many companies to relocate to places such as East Anglia.”
The right intelligence
The LEP model can clearly be an effective way to support the growth of innovation hubs, but some are under-resourced, says Graeme Henderson, research fellow at the Institute for Public Policy Research (IPPR). “Some have very few staff,” he says. “Local stakeholders may know what might work best for their area, but you have to provide the resources to make sure that their decisions are based on good economic intelligence – and you need long-term funding.”
Even so, when the mix is right it is clear that the economic benefits for businesses, other organisations and local economies where hubs and clusters develop and thrive can all be very positive. That should mean plenty of benefits for professional services companies such as accountancy firms too, if they are prepared to adapt to the way prospective clients are working. “Professional services companies need to innovate,” says Sturge. “Some are starting to share information for free, to build up trust and build the business, to be more open and speculative. But they have to be up for the ride, just like any entrepreneurial business.”
Dales Tourism Business Network
The Dales Tourism Business Network is different from most of the other business hubs examined in this article, but its successes show what can be achieved, at very low cost, by businesses whose shared aim is to promote their local area.
The network was formed two years ago by Susan Briggs, a freelance marketing consultant. It covers the Yorkshire Dales, where tourism is now more important to the local economy than agriculture. It has around 400 members, including food and drink businesses, accommodation providers, visitor attractions, craftspeople and artists.
Its big success in 2013 has been the Lost Sheep campaign. “We have these lost sheep in yellow jerseys: because they’re bright and cheerful and because the Tour de France will come here next year. We asked businesses to display a sheep, made of any material, wearing a yellow jersey. Some were life size, some pocket size, they were made of fleece, cake, bread, fabric and even recycled mattress springs.”
Visitors and locals could then enter a prize draw online if they spotted at least four sheep. It ran from July to September and there were over 300 sheep to spot. The Yorkshire Dales Sustainable Development Fund provided £200 for printing promotional postcards and posters. “We reached millions of people through social media,” says Briggs. “We generated a massive amount of PR coverage.”
The network also worked for the community during the summer of 2012, when bad weather had a dire effect on tourism and farming. “Everyone was moaning about the weather on social media and we thought they should start talking about the positives,” says Briggs. “We started making a list of 20 great things to do in the Dales when it’s raining – and we ended up with over 100. It ended up on regional TV.”
MIRA Technology ParkThe MIRA Technology Park in Leicester is home to a growing hub of companies working in research and development for the transportation industry. MIRA, founded as the government-funded Motor Industry Research Association in 1946, has gradually evolved into an independent vehicle engineering consultancy. The technology park opens up access to its facilities and engineering expertise. It was granted Enterprise Zone status in 2011 and has already attracted companies including Ashok Leyland, Bosch, Lockheed Martin, Continental, Jaguar Land Rover and Triumph Motorcycles.
The 1.5m sq ft site houses 100km of test tracks and 35 specialist laboratories. “We have wind tunnels and facilities that mean we can test something in the Arctic conditions in the morning and in the Sahara in the afternoon,” says Terry Spall, commercial director at MIRA Technology Park. “We can put trains in there, battle tanks, bits of aircraft. And it’s all backed up by a very large team of specialist engineers who work for MIRA.
“Businesses that want to come here want their own offices and workshops, but then they have direct access to all those assets, with none of the investment risk.” Facilities and skilled engineers can be hired by the day.
“We have 28 companies on site and should have three more names to add by the end of the year,” Spall adds. “We’ve currently got about 800 people on site, working across the 28 companies. We are expecting to add about 1,800 over the next eight years. We have created 240 jobs so far.”
Service companies are moving in too, with planning consent already granted for a hotel, convenience retail, restaurants, a coffee shop, health centre, conference centre and sports centre.
New technologies, existing areas of focus within regions and a willingness to share ideas are stimulating development of sector-specific hubs and clusters of businesses across the UK.
Different settings suit different types of companies, but internet technologies are helping to create virtual clusters in rural or geographically dispersed areas.
Successful hubs and clusters can act as engines for economic regeneration as well as driving innovation, and provide opportunities for service providers including accountants.