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London’s Knowledge Clusters: From Emerging to Maturing – Start Ups on the Global Stage?

One of the key themes the London Property Alliance explores in their latest research paper (headline sponsored by Charles Russell Speechlys LLP) on the evolution of life science hubs in London, is what investment is required to grow life science start-ups and spin outs into companies on the global stage? The research reflects on what currently inhibits investment and points to key recommendations which, amongst other things, could be fundamental in ensuring that the UK and specifically, London can attract and retain home grown life science companies.

Firstly, there should be a system for university spinouts (a company that has been borne out of the research of a university) which supports and develops the spinout to enable it to scale up. There is a real concern that the process for spinouts to raise funding is protracted with the research flagging that over 50% of deals take longer than six months to complete. This delay is coupled with a perception that universities retain disproportionate equity stakes in the spinouts, impacting on their long-term viability. An independent review carried out by the UK government in 2023 has encouraged universities to lower their stakes in the hope that this will drive external investment into spinouts. London, with its wealth of top research universities is in prime position to capitalise on innovation here. 

Secondly, ensuring that start-ups have access to capital at an early stage and then further access to growth funding at an institutional level. This is to counter the fact that the UK is seen as weak at ‘scale up investment’ when compared to countries such as the US. The UK’s reliance on high net worth retail investors means that funds are not raised on the scale required to support these growing life science companies. Ultimately, this results in losing start-ups who choose to move overseas or are otherwise acquired by overseas life science companies. To counter this, the research flags that the UK government is introducing initiatives (such as Long-term Investment for Technology and Science, designed to establish new investment vehicles to crowd-in investment) which will encourage investment from institutional investors. 

Thirdly, there needs to be investment in and the provision of incubator space and then appropriate growth space for these startups to enable them to effectively build on and use the relevant investments. In the paper, Louise Ward from Charles Russell Speechlys LLP flags that traditional office investor developers are looking to diversify their portfolio in London, so we know there is an appetite for life sciences development. The research paper goes further to say that “the sector needs to work collaboratively with other investors and developers in a cluster to ensure a coordinated approach to the type of space delivered. We have seen clusters such as White City and the Knowledge Quarter successfully do this and there is potential in London to do the same in other areas such as Paddington. 

Whilst a vital part of the growth of life sciences in London, investment is one of a number of issues that the sector will need to continue to focus on, alongside other challenges such as planning, attracting talent and sustainability. We will consider these in more detail as part of our series reviewing the LPA’s research report.

If the efforts to unlock institutional capital are successful, then that will be significant in supporting London and broader UK life science companies to scale.

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