Start-ups fall out of love with London

Rising rents to blame for number of early-stage businesses wanting to move out of the capital after 12 month "honeymoon" phase

Start-up companies choosing to set-up in London are likely to want to leave the capital after the first year of trading due to high rents, research from business network Sussex Innovation Croydon has found.

The study, which assessed the attitudes of 500 small business leaders across London and the South East, found that the likelihood of businesses considering relocating increases from 47% to 66% within a year – dubbed the “honeymoon” phase.

It then takes an average of an additional eight months of trading in the capital for business attitudes to return to the same as during the first 12 months.

Rising rents appears to be the biggest motivator for start-ups to want to leave London with 37% of businesses launched in the capital in the last year having stated that property rents would impede growth, this number increased to 62% for businesses trading for over a year and then down to 53% for those trading for three to five years. The figures drops to 31% after nine years or more.

Another factor for London relocation was closeness to peers, with a number of start-up businesses of the opinion that they were held back by a lack of proximity to like-minded businesses.

Mike Herd, executive director of Sussex Innovation at the University of Sussex, said: “Our findings reflect the start-up journey; a London address provides kudos and contacts when you begin but a year later, the honeymoon is over as bills start to flow in.

“In a reverse of the seven year itch, our polling shows small firms fall back in love with London only once they’re well established. If London is to hang on to more growth businesses it needs to look again at business rates and affordability.”

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