For those who were thinking about it, it is not going to be easy to take over the UK in terms of digital entrepreneurship. Of the 60 cities featuring in the European Digital City Index, 9 are in Britain and 6 of them are in the top 20. As expected, London scores at the top. Stockholm comes second and is first in terms of scaling up companies. Germany also hosts 9 of the best cities for start-ups, but they come lower in the ranking.

The index was published at the Start-up Nations Summit organised in Cork, Ireland, on November 18-20. It was compiled by innovation foundation Nesta and the European Digital Forum, a think tank that aims to grow Europe’s digital economy. Cities are ranked according to ten core themes, including access to finance, entrepreneurial culture and talent supply, with varying weightings for start-up and scale-up businesses.

The results: London is the best city in Europe for digital entrepreneurs because of its access to capital, the vibrant entrepreneurial culture and the skilled workforce. Over 275,000 companies are based in the British capital and they employ nearly 1.5m people. Major university cities, such as Cambridge, Bristol and Oxford, also score high thanks to mentoring networks, knowledge spillovers from research institutes and an overall favourable environment.

London, however, has a narrow lead over Stockholm, which has produced several of Europe’s biggest digital companies (Spotify; King, the creators of Candy Crush; and Mojang, creators of Minecraft). Stockholm has the highest penetration of residential broadband, the highest percentage of fibre broadband connection in Europe and the greater proportion of ICT-specialist users in the economy than any other country in the OECD. Adding to these factors, the population has strong English language skills and the government is generally supportive of entrepreneurship.

“London remains the most attractive European city for digital entrepreneurs in 2016, but Stockholm is snapping at its heels,” said Chris Haley, head of start-up and new technology research at Nesta. “Government must continue to invest in digital skills and digital infrastructure, as well as addressing the cost of office space, if it is to continue to attract the next Deliveroo or FundingCircle, with many competitor cities in Europe, China and the US working hard to attract young firms. Of course, it also remains to be seen how a ‘hard Brexit’ will impact on the UK’s business allure for digital start-ups, given that access to markets is also hugely important.”

Like the UK, Germany hosts 9 of the best cities for digital entrepreneurs. They benefit from strong public financial support, the presence of renowned universities and a varied cultural environment. But the score is relatively weak on the digital infrastructure.

Number of cities featuring in the ranking per country.

The ranking highlights an east-west continental divide. Among eastern cities, Tallinn (home of Skype) is the most attractive, in the 18^th position. It is followed by Budapest (33) and Prague (37). Eastern European cities score high for digital infrastructure but low for knowledge spillovers, entrepreneurial culture, market size and access to capital.

The index also reveals a north-south divide. Barcelona (9) is the first Mediterranean city. Italy scores particularly low, with Milan only 46th. In Italy, legislation to promote start-ups has improved since 2013, but access to credit and taxation levels are still problematic.

Top 10 European Cities for Digital Startups and Scale-ups (source: Nesta)

The 2016 European Digital City Index was published after the European Union launched a venture capital fund of 400 million euros to help regional startups grow and address a capital shortage in Europe in comparison with the United States.

Claudia Delpero © all rights reserved.

Photo: Stockholm Old Town by Brorsson (own work) [CC BY-SA 3.0] via Wikimedia Commons.