Technology

London tech firms struggle to hire as Silicon Valley giants scale up in the city

Google’s new London headquarters.

Google

LONDON – Technology firms in London are finding it increasingly difficult to recruit tech workers as Silicon Valley tech giants scale up their operations in the U.K. capital. 

U.S. tech behemoths including Google, Facebook, Amazon, Apple, Microsoft, Palantir and Twitter now employ tens of thousands of tech workers in swanky offices across London, and some have major expansions underway.

Oscar White, CEO and founder of venture capital-backed travel start-up Beyonk, told CNBC that the expansions were making recruitment more challenging, adding that they have prompted inflated salary expectations and a scarcity of tech resource.

Alphabet, Google’s parent, is in the process of building a vast complex in King’s Cross with enough room for up to 7,000 Google employees and around 1,000 DeepMind staff. A few miles away, Apple is planning to move 1,400 staff into a new Apple Campus at Battersea Power Station. While the builds have been held up by coronavirus lockdowns, they’re still going ahead. Elsewhere, Facebook and Amazon have recently opened big multi-story offices in London.

Facebook currently has 266 open positions in London, according to its career website, while Google has 172 and Apple has 103. Amazon is on the hunt for 162 software developers, 143 solutions architects and 72 technical managers in the city.

“Software developers are in higher demand than ever before, which is likely to worsen as more tech company campuses spring up around the city,” White said. “For start-ups on tight budgets, who heavily rely on technology resource as the key enabler for growth, this presents a real challenge.”

Twitter declined to comment. None of the other aforementioned U.S. tech giants immediately responded to a CNBC request for comment.

Salary expectations

Many start-ups in London will struggle to attract software developers if they offer salaries below £80,000 ($110,000), according to White, who said experienced developers can now command salaries of up to £120,000 a year.

Tom Richardson, CEO of money management app Lumio, told CNBC that it’s “so hard” to find the right people.

“We are a start-up and with only a seed round and we cannot attract devs or great product managers,” he said. “Starting salaries are mad.”

To get around the issue, Richardson is considering relocating his business or hiring more remote workers, but he said both have their risks.

Another CEO of a London tech firm, who asked to remain anonymous over concerns it may sound like their company was struggling to recruit, told CNBC that big U.S. tech firms have tried to poach several of their staff in recent years. They said one employee’s response was “when Manchester United knocks on the door you have to answer.”

The U.S. tech firm, which the CEO did not name, offered the employee the same salary but a much stronger overall package that included share options and a car allowance. “We ended up retaining them but had to make it worth their while and give them an offer they couldn’t refuse,” the CEO said.

Amazon had attempted to poach more of the London tech firm’s employees than any other U.S. tech giant, the CEO said, adding that Amazon has approached several project managers and account managers.

In a bid to ensure the company retains its best people, the CEO said they had developed a “more rounded benefits package” that included share options for high performing staff and career progression plans.

The VC view

Venture capitalists and tech investors have a relatively broad view of the recruiting landscape as they’re involved with multiple start-ups.

Simon Menashy, a venture capitalist at MMC Ventures, which has invested in dozens of start-ups including meal kit delivery firm Gousto and travel start-up Love Home Swap, told CNBC the new Silicon Valley outposts in London were “definitely contributing to salary inflation,” adding that the big tech firms compete with local start-ups for engineers.

But London start-ups were also competing with other start-ups in the city for some workers, according to Menashy.

“When our portfolio companies lose candidates for senior executive talent it’s to other start-ups and scale-ups, not to big established tech companies,” he said.

Eze Vidra, a former investor at Google Ventures who now works as a managing partner at Remagine Ventures, told CNBC it’s more difficult for London start-ups to keep good employees as they get “lured by ever growing packages and perks” from larger tech firms and better-funded start-ups.

Meanwhile, Ian Hogarth, an angel investor who sold his music start-up to Warner Music Group, told CNBC he’s not convinced the Silicon Valley expansions were making it harder for London start-ups to hire, adding that there are a few factors at play.

Hogarth argued that the rise of remote working has allowed companies to scale up without having everyone in a physical office. For example, Hopin, which is headquartered in London but is fully remote, has scaled from one to 800 people in two years, Hogarth said.

While Brexit may have made it harder for companies in London and the rest of the U.K. to hire, the growth of the U.K. tech ecosystem means there is more experienced talent available overall than before, according to Hogarth.

Alice Bentinck, co-founder of start-up investment firm Entrepreneur First, told CNBC that Silicon Valley firms increase competition in London in the short term.

“But long term I don’t think it’s a bad thing,” she said. “It’s a sign London’s tech ecosystem is thriving.”

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