Loss for talent: What impact does the London housing crisis have on start-ups in the City?
Britain’s ongoing housing crisis has created a knock-on effect for start-ups, according to new research shared exclusively with City PM, as small business owners begin to struggle to attract and retain talent.
The research, which was conducted by fintech firm iwoca, highlighted that 22 per cent of the 500 small and medium-sized enterprises (SMEs) surveyed said housing shortages were “directly” affecting their ability to attract and retain staff.
That number nearly doubled to 38 per cent for the SME owners based in London.
Amelia Hitchcock-Merritt, founder of London-based jewellery brand Bijoux De Mimi, said the current state of the housing market in London is a deciding factor for many workers, especially when they cannot afford to live in the city or pay “a fortune” to commute.
She added: “A recent conversation at our pop-up store was how all of the staff are battling rents that are going through the roof and houses that are becoming more and more un-affordable.
“This means they will usually have to move further away, travelling for longer to get to work.
“With the state of public transport these issues make life really difficult, taking people a longer time to get to work, and they have to pay a fortune for the privilege.”
Rail fares across Britain have increased 5 per cent this year, according to the Office of Rail and Road, with off-peak tickets seeing a jump of 5.1 per cent.
According to the Halifax House Price Index, the average house price in the UK is £288,455, with London averaging nearly double at £536,306, up 0.9 per cent from last year.
Earlier this month, property firm Rightmove revealed that the average advertised monthly rent in London is £2,652 per month, which is four per cent higher than a year earlier.
Some 58 per cent of SME owners also stated that “poor transport infrastructure” is having a negative impact on their business, with 22 per cent naming delayed or cancelled trains as one of the biggest challenges for commutes.
“All of this does have a big impact on smaller companies like mine. When our part-time staff are already under pressure, there’s been talk about how they can earn more money with second jobs at companies with a shorter commute,” Hitchcock-Merritt said.
The findings come as the nation patiently awaits the new Labour government’s actions on a major housing reform, with Labour leader Keir Starmer previously saying that he would work with local authorities to give first-time buyers first dibs on homes and limit developments being sold off to international investors.
In the Labour party’s 125-page manifesto, Labour also proposed to reform planning rules to build 1.5m more homes.
Mark Di-Toro, director at iwoca, said: “The new Labour Government is already calling the UK’s 5.5m SMEs the beating heart of the economy and has put growth at the centre of their plans.
“Improving the UK’s public services can play a key role in addressing the challenges that small and medium-sized companies face.
“Tackling issues in housing, health and transport will help more companies to grow and help them to attract and retain the staff they rely on.”