Is This Lancaster’s Waterloo Moment?

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Lancaster is a wonderful city and district to live and work in. Yet the perception is that it can be so much more for the benefit of all its citizens. One answer lies in growing Lancaster’s digital, tech and innovation economy, argues Michael Gibson in this guest post.

Lancaster City Council recently commissioned market research from an organisation called Thinking Place to understand what people thought of the city and district and its potential. It asked locals for their views on a range of topics, and on the vast majority of factors, such as schools, safety, leisure and happiness, the city scored very highly and significantly outperformed many other UK towns and cities when posed the same questions. Yet in one important area Lancaster scored very low – confidence.

To realise our potential, we must illustrate what’s possible and Guy Cookson’s excellent article clearly illustrated Lancaster’s largely hidden potential as a leading innovation and tech cluster. The purpose of this article is to show the full extent of what’s possible and ends by using the example of a city not dissimilar to Lancaster.

Why it matters?
The challenge for Lancaster is the danger of being left behind by the big cities. The UN predicts that 68% of people will live in cities by 2050 compared to 55% now. Already the process of agglomeration has begun with tech companies and the digital units of major companies from across the North, such as Auto Trader (Newton-le-Willows), Barclays (Knutsford), Space48 (Warrington) and many more relocating to Manchester from smaller towns with their staff following them.

Lancaster has, and is still suffering from, the same leakage of companies. The biggest example in recent years is Reebok. Starting on the Quay, it grew from Lancaster to become a global business. At one stage over 300 people were employed in the district in marketing, sales, design and warehousing. The closure of its Moor Lane Mills office and its White Lund warehouse and relocation of staff to Manchester saw the loss of a highly-educated, highly-skilled and highly-paid workforce that took with it an estimated £10 million of annual spending power from the heart of the city. Sadly, others have followed, either setting up subsidiaries in London or Manchester or moving altogether.

Thankfully, more companies stay and grow here. Besides Hotfoot, who has heard of Relative Insight, Habicus Group, Cloud Commerce Pro, Accesplanit, Fat Media, Yordas and NuBlue? Few of these companies existed barely a decade ago yet today they employ over 500 people between them and in the wider digital, tech and innovation community over 1,000 are employed in the district.

The impact on Lancaster is huge. When a company grows in the centre of Lancaster it brings clients to stay in hotels, spends money on suppliers from across the district and, most importantly, gives jobs to its young people. So, when someone on say a £40,000 salary in a technology job is employed in the city centre, they pop into town for lunch, go to the gym after work or the local pub, buy homes and then fill those homes with local goods. The money circulates around the economy to the benefit of all.

Building a tech cluster
Companies like being part of like-minded communities. It gives them strength knowing that there are both competitors and collaborators nearby. In Manchester the fashion industry grew in the Northern Quarter because not only were there mills, but also the machine tool works that supplied the chemical companies that made the dyes and pigments that supplied the mills. When the mills closed the expertise moved into importing and buying, which has now morphed into online fashion through the likes of Boohoo, Missguided and Pretty Little Thing.

Lancaster did the same with Williamsons, Storeys and Lansil employing thousands, and many more in the local suppliers to each of them. And it is doing the same now with a rapidly growing innovation, tech and digital sector.

What makes a thriving cluster?
There are several key ingredients which come together to make a powerful cluster and ensure it continues to grow.

1. Lancaster University
Lancaster University is a world-class institution. Voted The Times and Sunday Times University of the Year in 2018 it is now a fixture in the UK’s Top 10 rising to 7th in two of the latest guides and 6th in the other. As the city’s biggest employer, it brings well-paid jobs, vital employment for local people and tens of thousands of students bringing huge value to the city. It is also a world-leader in research that leads to that work being commercialised creating new companies and employment opportunities as they spinout from the University. Great innovations, such as the O-Wind Turbine, Global winner of The James Dyson Award were created here in Lancaster. And companies such as Relative Insight, Quantum Base, TNP, Digital Rail, Yordas, Stopford and many others simply wouldn’t be here if it wasn’t for Lancaster University on our doorstep.

And ‘on our doorstep’ remains a challenge. If the benefit of Lancaster University exists only as a large edge of town campus and student accommodation, in the city, then it will be a missed opportunity. Student accommodation pays no business rates, its tenants no council tax and its employment opportunities are small and minimum wage cleaning and security roles. While it is an important part of the economic mix for the city it can’t be the only part. Getting Lancaster University to open facilities in the city would transform Lancaster. Working to achieve it is a bigger task.

2. Great people
Our two universities give us a phenomenal pipeline of skilled talent but often it is the people with families coming to work or study who add to the economic and social development of the city.

At the same time our great schools and colleges continue to produce talented individuals who either stay or leave for pastures new.

It needs to be evidenced, but the sense that the number of people not born in the city outweighs those born here has become overwhelming. The new Leader of the City Council and the Manager of the Morecambe BID are Australian; hundreds of Chinese students live in the city; and my own friends and acquaintances in the city include 18 nationalities from Chile to Germany and Botswana to Romania. People from across the UK and overseas bring a wealth of experience, knowledge and skills allied to a love of their adopted city that collectively we can all benefit from.

3. Buildings and places to meet
Digital Lancashire’s report Nowhere to Grow highlighted the lack of quality office space in Lancaster. The report showed that tech companies are willing to invest in the right sort of property. These businesses need the spaces to think, create, collaborate, meet and impress. Given the amount of time that high-paid workers are at their desks, it is important to create the right environment to work in. This includes having access to high-speed fibre broadband; being able to meet people from other companies be it in the pub, walking down the street or at events and meetups.

The problem is there hasn’t been a new privately-developed office block built in Lancaster city centre for more than 30 years. So, why don’t we have more and better office space? Historically the private sector builds office space based on an understanding that there is demand and a willingness to pay the rental levels to give them enough yield on the space they build. The chartered surveyors Eckersley estimate that a figure of around £20 per square foot is the starting point to justify investment. Student accommodation exceeds this figure, investment is easy to obtain and the demand in Lancaster is growing as student numbers grow, hence why it is currently the only property show in town.

To make up the difference, the public sector has stepped into the market. Lancaster City Council has developed workspace at The Storey and CityLab; Lancashire County Developments, the property arm of Lancashire County Council, has acres of office space at White Cross Business Park; and Lancaster University offers co-located workspaces, many recently built, that have proved a huge success in growing new and existing businesses. However, these offices have been offered at substantially reduced rents averaging roughly £10 per square foot. While these buildings make a profit for the authorities, it suppresses the ability for the private sector to speculatively build in the city. At the same time, because the spaces are cheap, none of the added benefits come with it. At White Cross there is no high-speed fibre broadband (although is rumoured to be coming); offices are routinely basic; corridors are glum in design; space are let to the next bidder, so a high-tech company can be sandwiched between an NHS treatment centre and a wildlife charity (no criticism of either but hardly supportive of eco-system creation); and despite being operated by an economic development department there is no economic development support offered other than the cheap space itself. The simple reality is that investment into upgrading office space, providing more space for meetings, curating those businesses with thought and support, and investing money into resources will allow for higher rents that will create a bigger surplus for reinvestment.

If the public sector is the only show in town then we need to find ways for them to take on more office space to support businesses, and in the right way, while creating a surplus for those willing to be brave enough.

The good news is that Lancashire County Council have taken this message on board and are about to make some big announcements on investment at White Cross. This is a very positive step on this important journey.

4. Money
Which brings us neatly to money.

Tens of millions of pounds in economic wealth disappears from Lancaster every year. Income and profit from, for example, student accommodation, large retailers, branded coffee shops and pub chains, in most cases heads out of town. Firstly, we need to keep more of that wealth here and that means as businesses and companies buying locally, supporting businesses based here and encouraging them in turn to do the same. This sustainable wealth creation is best exemplified in the so-called ‘Preston Model’, which has seen tens of millions of pounds previously spent outside Preston, kept in the city and recirculated. Lancaster City Council are doing great work with CLES to encourage the same here.

To counter the outflow of money the answer is inward investment. So, when economic development teams in local authorities consider inward investment they often just look at companies relocating. However, as we’ve shown above, the relocations that do happen are going the other way, with companies moving high-skilled high-tech jobs to the big cities.

Yet inward investment comes in many other forms, including people moving in and, importantly, money being invested. The money comes in different forms, for example government investment, research grants, venture capital and property investment.

As a result, our three economic development departments – Lancaster City Council, Lancashire County Council and the Lancashire Local Economic Partnership – must think and act differently to address the changes in the economy.

To become a wealthier city for the benefit of all our citizens then we need to attract money and wealth into the city that then gets distributed.

The most successful example is Lancaster University. Its continued growth has created major capital projects – new sports hall extension, management school, engineering buildings, cTap etc. – worth over £500 million. Additionally, it draws in well-paid brains that when they live in the city add hugely to the cultural and economic value of the city.

However, much of the investment in Lancaster is hidden. Just over £18 million has been granted to 45 companies in the Lancaster district through Innovate UK, the government’s innovation service. This money is used to develop new products, which in turn leads to substantial growth in high-skilled and high-paid employment. Venture capitalists and investors have poured an estimated £15 million into Lancaster companies in the last three years. A great example is Relative Insight, who work with major brands around the world, who’ve received over £1 million in investment and grown their team from 7 to 30 this year alone.

These numbers are tiny compared to Cambridge, however, which received £192m in just three months in 2018. Lancaster has the potential to get far more investment into start-up and scaling businesses.

5. Civic leadership
To deliver on the promise of Lancaster we need exceptional civic leadership. With the right vision for the city, engaging with experts from Lancaster University, we can deliver on the promise of the whole district, including Morecambe and the rural areas.

As part of this we need to decide how we’re run. We currently have two councils (more if you live in Morecambe or a parish), which run different services, some of which conflict, e.g. one manages the pavements and one manages the roads. To oversee see this we have two bureaucracies and 71 councillors. Decision making is often far away or with little input. Surely, we can do better? A unitary council must be on the table.

How another small city transformed itself
The city of Waterloo in Canada has a lot of similarities to Lancaster – a population of 105,000, two universities and roughly 60 miles from a prosperous tech-focused city – Toronto and Manchester respectively.

In Waterloo’s case their largest employer was the mobile phone maker BlackBerry. As it lost out in the era of smartphone development to Apple, Samsung and cheaper rivals, the city of Waterloo knew it needed to act in order to retain the talent from BlackBerry and its universities.

In 1997 an organisation called Communitech was established by local tech leaders and funded by all three levels of government, member companies and corporate partners to help develop the local tech economy.

However, as BlackBerry dwindled Communitech came into its own. A group of tech leaders got together to accelerate their work. The impact was immediate. In 2010 there were 155 start-ups in the area by 2014 this had grown to over 500. If each of those employs three people, that’s 1,500 jobs immediately.

These start-ups were funded by development capital, with pension funds being a big investor. For example, the Ontario Municipal Employees Retirement System (effectively the same as Lancashire County Council Pension Fund) itself invested C$180m (£120m) in local early-stage start-ups from 2011 to 2014.

One of the most important factors was the University of Waterloo. They made the decision that all intellectual property belonged to the creator and there were no complex negotiations over ownership, this gave people the belief in taking forward their ideas. At the same time, they setup the ‘co-op’ programme that gave its students the opportunity to experience work in six different companies. The Toronto Globe and Mail described its impact as follows, “[In 2015], the university filled 19,250 placements in 40 countries, and the students earned C$225 million in wages. Not bad for a university with 35,000 full- and part-time students”. These students invigorated by their experiences and with money earned to offset their student debt have more freedom to think about starting their own businesses.

Lastly, it invested in co-working space in the heart of Waterloo. Working with the Municipal Government of Waterloo to create clustering, not just in tech but in other industries to help the city’s growth. The success of the tech community has led to accelerators to help businesses to grow, which has blossomed into people starting breweries, bars, shops, social enterprises, cycle shops and much more.

In this video about Waterloo’s successful start-up community (and community is a really important word),  Karl Allen-Muncey, the British founder of tech company Cute Gecko gave his reason for moving to Waterloo, “it had arts, culture and technology, and the perfect place to bring up a family and start a business”. Surely a great description of Lancaster, and what it could be?

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