London has been lauded as the centre of the startup universe, but is Birmingham primed to take the lead?
The Midlands is now home to 317,040 enterprises, the third highest figure in the UK. In the 18th century, Birmingham was hailed as "the first manufacturing town in the world". It was at the forefront of worldwide advances in science, technology and economic development. It grew to international prominence, producing a number of innovations that laid many of the foundations of modern industrial society. It was Birmingham's distinctive economic profile, with thousands of small workshops specialising in a wide variety of highly skilled trades, that provided a diverse and resilient economic base for industrial prosperity.
The 20th century issued a pervasive narrative about the region's once-mighty industrial heritage (and its decline) but that story has taken a new turn. The West Midlands' industrial roots have re-emerged – an exceptional innovative and entrepreneurial spirit is driving growth across advanced manufacturing and perhaps more surprisingly, across digital, technology and med-tech sectors.
The Midlands is now home to 317,040 enterprises, the second highest outside London, which houses 372,340. In 2013, Birmingham topped the new startup list with more companies (16,281) being launched here than in any other UK city outside of London (second was Manchester at 11,765).
The latest Barclays and BGF Entrepreneurs Index report showed that one in four (26.3%) companies in the Midlands are now considered high-growth, which are those with revenues between £2.5m and £100m and which have increased turnover by 33% over the preceding three years, among other things. This represents a 54% increase in the year to March 2013 – the second highest percentage growth of any UK region after Wales.
What is Propelling Growth in the Midlands?
Manufacturing as it was known in the Industrial Revolution – low skill, mass production lines – has forever changed, but has undergone a dynamic transformation in the 21st century. Today the manufacturing sector is an innovation powerhouse, dominating research and development in the UK economy. The high-value engineering segment of UK manufacturing – nanotechnology, 3D printing, the automotive industry, pharmaceutical manufacturing – accounts for 35% of all exports and contributes £151bn worth of value.
The West Midlands holds the highest concentration of high-value engineering jobs in the UK with more than 49,600 employees, and the sector has contributed £13bn or 14% of the West Midlands economy. The region exported £2.7bn worth of goods to China alone in 2012.
About 1,500 manufacturing jobs that moved offshore to cut production costs have been brought back to the UK since 2011, and more are expected to follow. A good example is Birmingham-based Barkley Plastics, which produces injection moulding, assembly and toolmaking. The company has won significant businesses back from China, the Czech Republic and Germany in the past year.
Tipton-based Cab Automotive, producer of interior components including seats, armrests and dashboard consoles, is also experiencing its fastest-ever growth. The company recently bought back 200,000 square feet of factory space to house this expansion.
Research and Development
This growth has been catapulted by strong R&D investment in the region, which is continuing to gather momentum. Take, for example, the £60m aerospace and national 3D-printing research centre, the £36m advanced engineering training centre at Coventry's Manufacturing Technology Centre, or the £100m National Automotive Innovation Campus being developed by Warwick Manufacturing Group. These are just a few examples of how the public and private sector are working together to reinvigorate the regions and West Midlands in particular.
It's not just manufacturing. The University of Birmingham has broken ground on a £6.8m biomedical hub to open this summer. The facility will offer laboratory and office space to boost Birmingham's burgeoning life sciences sector and is expected to create 600 jobs.
Technology
Technology startups are also thriving in the region. A flourishing tech community exists at the Innovation Birmingham Campus, where 38,000 square feet of open work space promotes mobile working for startups. The region's universities are also a hotbed of startup activity, boasting entrepreneurial graduate successes like two companies we invested in, Allinea and ScriptSwitch.
There's also a generation of young entrepreneurs, such as Nick Holzherr (of The Apprentice fame), who are leading a bow-wave of pioneering digital enterprises like Birmingham-based Whisk, a successful grocery shopping list app integrated into the online delivery operations of Tesco and Waitrose.
As a venture capitalist working in Birmingham over the last 10 years, I have seen how the legacy of those thousands of small workshops has evolved into a large number and broad range of innovative and technology-based startups – ones full of entrepreneurs who are keen to take advantage of the West Midlands' increasingly relevant skill base, infrastructure and support networks.
Add to this the region's central location, the (long-awaited) redevelopment of New Street Station, and being at the heart of the proposed HS2 project, and it's not difficult to see why the region has a growing momentum and feels like an exciting and innovative place to be.
Roger Wood
This article originally appeared in The Guardian, April 4, 2014.
