A Cambridge education

Yorkshire Business Insider, November 2001

The university city of Cambridge has become one of the most successful technology clusters in Europe, but is now struggling to keep up with its own growth. Tim Chapman examines the lessons for Yorkshire

It's next to impossible to speak of cluster development in the UK without referring to the success of Cambridge. The small university city, roughly the size of York, has over the past two decades become one of the most active centres of technology industry in Europe.

Significantly, the Cambridge cluster has grown organically out of the intellectual wealth of the city's colleges, without the benefit of any masterplan from the public sector. But it is because of the lack of a guiding hand that the city's growth is now stalling because of the overloaded transport infrastructure and desperate shortage of land.

The "Cambridge phenomenon" was given that name in 1985 by city consultancy Segal Quincy Wicksteed in a report charting the emergence of some 350 high-tech firms in and around the city. Most of the firms had their origins, directly or indirectly, in the university or the local research community, and SQW's report acknowledged the key role played by a small number of entrepreneurial individuals.

Last year, SQW published a follow-up report tracking the continuing growth of the city's hi-tech industries. A glance at the eight largest hi-tech employers is not encouraging, with an absolute decline of up to 4,000 jobs in the decade after 1985. But while these eight provided up to 60 per cent of hi-tech employment in the mid-80s, by the mid-90s their share had fallen to 20 per cent. Excluding those eight, employment in the cluster as grown at 10 per cent per annum, with 32,000 workers employed by 1,250 firms by 1998.

Growth has come from the IT and telecoms industries that give the area the name "Silicon Fen", and also from biotechnology (see below). Despite some high profile inward investments such as Microsoft's first European R&D facility, much of the dynamism has continued to come from within the city with spin-outs of new firms from academia and existing businesses a major feature of the scene. An SQW survey of Cambridge firms found that almost four-fifths were independent start-ups. Half of these had a founder coming from an existing firm in the area, and another 16 per cent coming from Cambridge University or a local research establishment.

The university has led the way in the commercial exploitation of the fruits of its research, by encouraging academics to become entrepreneurs and by joint projects with industry. One of the cornerstones of the Cambridge phenomenon is the Cambridge Science Park, founded by Trinity College in the early 1970s. The park is now home to some 4,000 workers in over 60 companies, with tenants ranging from Sun Microsystems to biotech group Incyte Genomics, as well as support services such as venture capitalists 3i and Merlin Ventures.

St John's College followed suit in 1987, offering accommodation and support to early-stage knowledge-based companies. The St John's Innovation Centre now houses around 50 companies, and recently launched the Cambridge Venture Gap initiative with solicitors Crust Lane Davies to provide seed capital and support to start-ups. The university has also forged a DTI-backed alliance with the Massachusetts Institute of Technology (MIT) to improve competitiveness, productivity and entrepreneurship in the UK. BT is investing 2.5 million over five years in string of joint research projects, and BP is funding a 2.5 million five-year project on low-energy building design.

One distinctive element in the evolution of the cluster is the role of the technology consultancies such as Cambridge Consultants Ltd, part of the global Arthur D Little group, and the Generics Group, which was recently identified by Merrill Lynch analysts as a future "technology giant".

SQW estimates that between 80 and 100 spin-out firms have at least one founder from a technology consultancy. CCL alone boasts of spinning off at least 15 companies which now employ over 2,000 people in the Cambridge region, including listed companies such as Xaar and Domino and hotly-tipped wireless group Cambridge Silicon Radio.

But as with all boomtowns, rapid economic growth brings its own problems. Cambridgeshire is the fastest growing county in the UK, with a 22 per cent population increase since 1984, and a further 25 per cent growth expected by 2021. Transport links into the city are as congested as those into central London, with a similar lack of affordable housing creating recruitment problems. Development land is at a premium, with the limits of growth staked out in 1999 when the DETR rejected a planning application by the Wellcome Trust to build a business campus on a greenfield site.

The East of England Development Agency, the Cambridge-based equivalent of Yorkshire Forward, is now addressing the city's infrastructure problems, and trying to spread the benefits of the dense hi-tech cluster further around the region.

"The level of investment in infrastructure has lagged behind the level of growth and it's now beginning to impact on the development of the Cambridge economy," says EEDA planning and infrastructure manager Steve Cox. "We can't get enough workers to come and live in the Cambridge area. One solution to the labour market is to live slightly further away and that's causing real problems on the rail and road routes into Cambridge."

EEDA is working alongside the planning authorities to speed up the planning process and infrastructure delivery, and will be reviewing the greenfield boundaries of the city as part of a county-wide structural review. Under assumptions of full employment, every hectare of land for high tech employment needs a further 15 for houses and supporting infrastructure.

"Over the past 10 years one of the principal obstructions to helping Cambridge grow has been the greenfield boundary," Cox says. "We've reached the point now where there is a need to review the boundary to enable housing development and the right kind of business opportunities."

Part of the solution is to deflate the Cambridge bubble by encouraging investment in surrounding areas, with efforts concentrated on the corridors to Oxford in the west and Ipswich in the east. The East of England is already one of the wealthiest in England - with a population only slightly more than Yorkshire's five million, its GDP is over a third higher. One revealing difference is the fact that companies in East region spend 2.7 per cent of regional GDP on research and development, compared with a mere 0.5 per cent in Yorkshire.

"We do recognise Cambridge as at the core of the hi-tech region but its potential to bring benefit to other parts of the region is tremendous and we want to try and exploit that," Cox says.

The challenges now facing Cambridge's hi-tech industry clusters are at least two steps beyond those facing the nascent clusters of Yorkshire. Many a fast-growing company has floundered because its management systems failed to keep up with its expanding bottom line - cities and regional economies are no different. In business terms, Cambridge is moving from its entrepreneurial stage into what should be prolonged, sustainable growth. By comparison, Yorkshire's clusters are still drawing up their business plans.


Biotech boomtown
As befits the city where the double helix structure of DNA was first discovered, Cambridge's biotechnology cluster is perhaps the most fully formed in Europe.

Cambridge and its halo of business parks are home to around 150 biotech-related firms, with another 75 or so further out in the county. The number of biotech companies established in the region doubled between 1995 and 2000, with 30 per cent of that growth in the year 2000.

A recent survey by regional biotech networking group ERBI found that 80 per cent of companies felt they benefited from being part of the broader regional biotech community, with companies focused solely on the region feeling the most benefit, mainly from added value to company image.

According to ERBI chief executive Jeff Solomon, the main benefit of the cluster is the concentration of experienced professionals and entrepreneurs. "Generally speaking, biotech companies are located where the founders are," he says. "You have to have that entrepreneurial base of people who live in the area. Also, there's a whole host of companies who have moved here and it's access to people that's extremely important for them."

The wealth of support organisations around the city, from specialist legal advice to dedicated facilities, is also a critical part of the cluster. The growth of the support sub-sector, which includes many established bodies who have adapted to serve the biotech market, more than matches that of the actual research community.

Access to capital is also vital for technology start-ups, and Cambridge benefits from a host of venture capitalists with bases in the city. Solomon also notes that Cambridge also benefits from its relative proximity to the City of London. "It's an unfortunate aspect but that is important as an international finance centre," he says. "The one thing you don't come to Cambridge for is because it's easy to find a place because it isn't."

Biotech is particularly susceptible to planning constraints, as a biotech facility typically requires twice as much space per employee as an office-type development. "If planning guidelines only allow certain density you create a problem for biotech," Solomon says. "Property developers need to think on that."