Why Tech Startups Are Ditching London: The Rise of Regional Hubs From affordable office space to specialised talent and thriving local ecosystems, UK entrepreneurs are discovering that success doesn't require being in the capital. Explore how cities like Sheffield, Leeds, and Southampton are reshaping the startup scene.

London has long held the spotlight as the UK's entrepreneurial heart, where venture capital flows freely, and cutting-edge innovation is cultivated. Yet, across the UK, a quieter revolution is taking place. A growing number of tech startups are making the strategic decision to base themselves outside of the capital. These regional hubs are not only offering a more affordable operating environment but are also providing unique access to specialised talent, academic support, and an ecosystem rich with opportunities. As these regional tech hubs continue to expand, they are reshaping the UK's startup scene, creating a more balanced and resilient landscape for innovation.

Nick Thompson, co-founder and CEO of Sheffield-based robotics company BOW, explains why his business chose to locate outside of London. "We've chosen Sheffield because it was where Daniel Camilleri (BOW's founder) was at university. Sheffield is a hub for manufacturing - with the AMRC, and other prominent robotics and electronics manufacturers like Universal Robots and Piromini."

For Thompson and BOW, Sheffield offered more than just cost benefits. It was an ideal location due to the region's manufacturing expertise and its thriving robotics and electronics sectors. "We get cost advantages in terms of premises, to some extent wages, and access to talent from the best universities in the country that offer deep tech, robotics, and electronics - Sheffield being a prime example," Thompson explains. "We've already picked up an important client in XPLOR/Production Park in Wakefield, and all in all, there is an ecosystem that combines tech, robotics, and manufacturing that plays well to BOW's ambitions."

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BOW's story reflects a broader trend where regional cities are not just offering startups cheaper alternatives to London - they're offering vibrant, sector-specific ecosystems that support sustainable growth. This is a point also echoed by Dan Buckley, CEO of Cognexo, an AI based platform developed to boost the employee experience, based in Leeds. Buckley chose the city for its "ambitious, forward-thinking culture and rapidly expanding tech ecosystem."

Leeds, like Sheffield, is positioning itself as a key player in the UK's startup scene. "Leeds offers a thriving network of startups, innovation hubs, and established tech companies - all of which make for an environment that promotes collaboration and growth," says Buckley. "Its dynamic workforce, backed by leading universities, provides a constant stream of skilled talent, and the city's exceptional transport links ensure convenient access to other major UK hubs."

For Buckley, the decision to remain in Leeds rather than migrate to London was also about avoiding the high costs associated with the capital. "Opting for Leeds as our base means we can benefit from a vibrant, talented community without the saturation and high costs often associated with the capital," he adds.

The power of local ecosystems
One of the most compelling reasons to choose a location outside of London is the ecosystem that exists in many regional cities. Dr. Alice Iles, Head of Tech Acceleration at Future Worlds, the tech startup accelerator at the University of Southampton, explains that the strength of the University of Southampton's engineering and technology research has led to the creation of many successful tech startups and spinouts.

"The strength of the engineering and technology research at the University of Southampton sees many academics at the University launch tech startups and spinouts," Dr. Iles says. "We've seen many innovative tech startups such as AbSolar, ViridiCO2, Dynamon, Aquark Technologies and AccelerCom choose to stay in the region rather than migrate to bigger cities like London."

These startups benefit from staying local, where they can continue to access support from the university and the broader Future Worlds startup ecosystem. "Staying local gives founders continued access and support from the University and the Future Worlds startup ecosystem, whilst being in travelling distance to London and international transport links," Dr. Iles adds.

In Southampton, as in cities like Sheffield and Leeds, the local academic and research institutions play a crucial role in fostering innovation and providing startups with the expertise they need to succeed. The university's tech research is closely tied to the city's entrepreneurial ecosystem, creating a fertile ground for new ideas and collaboration. The ability to stay close to these resources, without the high costs associated with London, allows startups to flourish in a more supportive environment.

A cost-effective and inclusive environment
Operating outside of London has clear financial advantages, particularly for early-stage tech startups that need to stretch their resources as far as possible. For many, the cost of founding a startup in tech can be prohibitive, meaning that only a select group of people with access to capital are able to enter the market. By locating in regional hubs, companies can access talented staff at a lower cost and offer affordable premises.

Dr. Iles highlights how the ability to attract local talent without paying a London premium is a significant advantage. "The cost of founding a startup in tech can be prohibitive to some, which in turn means the sector doesn't benefit from a diverse range of ideas and talent," she says. "Startups that choose to stay out of London can access talented local staff without attracting a London premium, meaning staff benefit from a lower cost of living and startups can operate more affordable premises."

This dynamic benefits both startups and their employees. In cities like Sheffield, Leeds, and Southampton, staff enjoy a lower cost of living, while startups can operate at a fraction of the cost compared to London, where rents and wages are much higher. The combination of lower costs and access to talented individuals creates a fertile environment for innovation and growth.

Decentralisation and the future of UK tech
The decentralisation of the UK's tech scene is being driven by several factors, and entrepreneurs are increasingly looking to regional hubs for the advantages they offer. One of the key factors driving this shift is the rise of remote work and digital connectivity, which has reduced the need for startups to be physically based in London. "The rise of remote work and digital connectivity reduces the need to be physically located in London or any other location," says Buckley.

Moreover, local governments and universities outside the capital are investing heavily in infrastructure and innovation districts, which provide early-stage companies with the resources they need to succeed. These investments are making it easier for startups to flourish in cities like Sheffield, Leeds, and Southampton, creating a more inclusive and competitive tech ecosystem.

Thompson agrees that this decentralisation is reshaping the UK's tech landscape. "Support from local governments, accelerators, and targeted investment funds is fuelling this momentum, as investors increasingly mandate regional HQs to create jobs and opportunity. All of this is decentralising the UK tech landscape, proving that innovation doesn't have to be London-centric. Regional hubs are reshaping the future, offering startups an ideal environment to grow sustainably and compete on a global scale," he says. "Regional ecosystems are playing to their strengths: Sheffield is a leader in manufacturing and robotics, Newcastle is driving innovation in energy and renewables, and Manchester is excelling in AI and health tech."

The resilience of regional tech hubs
As the UK's tech scene becomes more decentralised, regional hubs are becoming more resilient and less susceptible to economic fluctuations. "Regional tech hubs like Leeds are contributing to a more balanced, nationally distributed startup landscape," says Buckley. "This decentralisation encourages unique local specialisations - Leeds, for instance, has strengths in digital, medical and fintech sectors - leading to more diverse innovation pipelines. Over time, this will build greater resilience within the UK's startup scene."

Dr. Iles also points to this growing resilience in Southampton's tech scene. "These changes are reshaping the tech landscape into a more inclusive, competitive, and sustainable ecosystem," she says. "Startups can now emerge from anywhere in the UK and still access vital support, investment, and opportunities."

The rise of regional hubs is building a more inclusive startup ecosystem, one where innovation is not confined to London. These hubs are offering new pathways to success for tech startups, creating a more balanced and dynamic landscape for entrepreneurship in the UK.

The future of the UK's tech ecosystem
Looking to the future, it's clear that regional tech hubs are set to continue reshaping the UK's entrepreneurial landscape. "I see regional hubs not just competing with London but leading in key industries," says Thompson. "Over the next few years, I think we'll see these cities not only challenging London but becoming world leaders in their respective fields."

The growing strength of cities like Sheffield, Leeds, and Southampton is a testament to the power of decentralisation. These regions are not just offering a more affordable alternative to London—they are cultivating ecosystems that support long-term innovation, attract global talent, and provide access to the resources that startups need to thrive.

As more startups follow the lead of companies like BOW, Cognexo, and those emerging from Future Worlds, regional hubs will continue to grow as key players in the UK's tech sector. What began as a move to reduce costs has blossomed into a fundamental shift in how the UK's startup scene operates, creating a more diverse, resilient, and sustainable ecosystem for the entrepreneurs of tomorrow.