The Containerville social and economic impact report January 2020
Table of contents
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Introduction Executive summary 1. Welcome to Containerville Where we are The people behind Containerville 2. An environment for ACE businesses Creating space for start-ups Sustainable workplaces 3. Why containerville works for today’s start-ups 4. Containerville’s success stories Case no.1: MAYOR Productions Case no.2: E2Architecture Case no.3: Lila Loves Case no.4: Batch.works Case no.5: Karma Cans 5. The bottom line: Containerville’s economic bonus Employment benefits Wider employment benefits Economic activity Tax revenues 6. Why Containerville is important Conclusion
Small businesses are the lifeblood of the economy and these are often the high growth firms that end up creating the jobs needed to sustain our livelihoods. This was the inspiration for the decision to establish Containerville, a collective workspace for the 21st century in a former Victorian era corner of London that had fallen on hard times. Helping small businesses thrive is essential for creating jobs that are vital for people’s wellbeing and the establishment of strong and stable communities. It is easy to forget that giant corporations such as Amazon and Apple were themselves built on the success of small businesses using their platforms to sell their wares. By using re-purposed shipping containers to provide compact and low-cost office space, Containerville is not only fulfilling a need among entrepreneurs for compact business space on affordable and flexible terms, but also ensures that its development is environmentally sustainable . Rather than decide that we know what our tenants want we listen to the individual needs of each business and aim to provide them with a personalised service which will benefit them the most. As this report shows, almost 350 jobs have been created by the companies at Containerville since it started in 2015, which have in turn helped to sustain other jobs in the area. We are not looking for unicorns — although we would love to nurture businesses that end up being worth $1 billion. We are focused on helping what we call the ACES — authentic, connected, entrepreneurial and supportive businesses.
One of our tenants could be the next Facebook but they are also likely to be a carpenter, a dog grooming business, a 3D printer or an architect. We’re big champions of real genuine businesses that enable people to support themselves and their families by making a good living. We also believe we have created a community of businesses. We worked to create communal spaces where people can work closely together. The premises have become a community that provides an opportunity for these small businesses. If you’re looking for opportunity, you need to connect to people. Containerville brings these people together and gives them the platform to collaborate, swap ideas and to work together. Many businesses have found each other and are now working together. It is often the case that one plus one equals three. The way that you do that is by trying to create a community around the space where you operate. If we can contribute by giving people space that works for them at an affordable price, that’s a great offering from a business point of view and an opportunity to make a real social impact to enable those businesses to thrive and grow. Shraga Zaltzman MBE CEO, Containerville
Executive summary • Established in 2015, Containerville has helped rejuvenate a once derelict area of east London by establishing a development that provides affordable and user-friendly business space while creating a local community and delivering environmental benefits.
• Since Containerville opened its doors in 2015, well over 200 businesses have set up shop in one or more of the containers, employing around 600 people. We have carried out a survey of our tenants and analysed the results to identify the economic benefits that it has brought.
• Containerville’s growth is a • A Containerville unit is less than strong signal that there is demand half the cost for the same area of for this type of affordable and space in many City districts that flexible workspace. Having gone are in excess of £30,000 a year from a handful of occupiers and is 37% cheaper than Stratford, when it opened in 2015 to over which is the cheapest zone in east 120 occupied containers at the London (and indeed all of inner end of 2019, there is potential for London) at £19,300 a year. greater growth as Containerville • More than half of Containerville continues to expand. tenants cycle or walk to work and • Each container is 285 square a quarter use public transport feet (26 square metres) and such as a bus or one of the nearby can comfortably fit six desks. railway stations. This is far more It is fully equipped with the environmentally friendly than essentials: high speed Wiinner London where fewer than Fi, double glazing, heating, one in five people (18%) walk or electricity and a basic kitchen cycle to work, 60% take public unit. The containers are for transport and more than a fifth rental periods of 12 months (22%) drive to work. or longer, at a monthly rate of £1,000 plus VAT, which includes internet, electricity, water and service charge.
• The UK’s median full-time gross weekly earnings of £569, is equivalent to £29,588 a year. Multiplied by the 350 people on site that translates into total annual earnings of £10.35m for a workforce that is made up predominantly of residents in Tower Hamlets or Hackney. • Using government econometric tools, for every job created the equivalent of just over half of another job is created. In other words, the 350 jobs at Containerville have indirectly led to a further 210 jobs created elsewhere. • Based on the survey, we estimate weekly spending of £19,167 or £1.36m a year in the local area. Asked how often our tenants visited local establishments, almost half said it was a daily activity, while quarter went out four times a week and another quarter two or three times.
• We estimate gross annual turnover of £78.8m coming into Containerville’s resident companies. Using the multiplier of 1.54, we estimate that that activity brings a further £42.6m in indirect and induced benefit. Containerville firms’ procurement budget is estimated at £35.2 m or £54.2m after applying the multiplier. • Containerville also generates tax revenues. Income tax from workers is estimated at £2.07m a year while VAT receipts from businesses’ and employees spending amounts to another £2.07m. • The success of Containerville has fuelled an ambition to expand and to establish similar sites across London, to other British cities and eventually internationally.
Welcome to Containerville
Just five years ago this corner of East London next to the Regentâ€™s Canal and near to a railway line out of Liverpool Street station was the site of the derelict Shoreditch Gas Works. The giant Bethnal Green gasometers are still there but alongside them now is a new business park constructed out of re-purposed cargo containers that are now state of the art offices. They are home to scores of businesses offering everything from a craft whisky company to an innovative greeting cards business. Established in 2015 as Containerville, it is a dynamic and exciting workspace for start-ups in east London. The development comes with its own strong ethos. Containerville offers compact affordable workspaces for budding entrepreneurs at a time when soaring property prices and skyscraper office developments have shrunk the options for small and medium sized businesses in London. Rather than sharing a large open office, each company has sole control over its space and can equip and decorate it to meet its needs and desires reflecting its own business culture. The close proximity of so many small businesses creates the potential for a positive environment for creativity, focus and connection, enabling companies and people to grow together. This strategy fits with the desire of the managers and owners of Containerville to personalise the way people work and live.
Welcome to Containerville
Where we are
Containerville includes two sites. The first, on Corbridge Crescent E2, is home to the first 33 containers arranged vertically in three rows of 11 units each with their own secure front door but connected by metal walkways. After the success of this first round another 45 units were added in a similar stack on the other side of a courtyard. The whole site is protected with CCTV and gates which are locked at night with 24-hour access for tenants and with a telecom entry gate allowing high levels of security. The second phase around the corner on a road called Emma Street will take the total number of units up to 200 and will include a communal courtyard area with outdoor seating and barbecue equipment for Containerville tenants to host their clients, friends and families.
Each container is 285 square feet (86.9 square metres) and can comfortably fit six desks. It is fully equipped with the essentials: high speed Wi-Fi, double glazing, heating, electricity and a basic kitchen unit. The containers are for rental periods of 12 months or longer, at a monthly rate of ÂŁ1,000 plus VAT, which includes internet, electricity, water and service charge. Containerville seeks to offer a relationship with its clients that goes above and beyond the normal landlord/tenant dynamic. Entrepreneurs are wary of being tied down with long-term leases with high penalties for breaks. Although the standard lease is two years, our clients can take a penaltyfree break after a year. The all-inclusive price avoids the issue of unexpected charges. Overall, therefore, Containerville is designed around freedom for the small business.
The people behind Containerville
Containerville is run by chief executive Shraga Zaltzman. He has always been passionate about giving back to the community and ensuring that people can have the chance to do what they want to do. Before joining the company in April 2017, he spent 10 years at the helm of Work Avenue, a charity providing guidance and financial support to individuals and fledgling businesses. His work earned him an MBE in 2016 for services to employment and enterprise. To contact Shraga, email Shraga@maxbarney. com or phone +44 (0)20 7583 5555. Containerville is a Max Barney Estate development. The Max Barney Estate is a family run property company with a history dating back to the 1960s and steeped in central Londonâ€™s bricks and mortar. It is a business that prides itself on adhering to old fashioned values whilst at the same time adopting a modern and forward-thinking outlook to its buildings and the businesses that occupy them. It takes a long term and conservative view on property ownership and management. This allows it to adopt a very different style as a landlord.
An environment for ACE businesses
An environment for ACE businesses
Creating space for start-ups
Since Containerville opened its doors in 2015, over 200 businesses have set up shop in one of the containers. The development has always had close to 100% occupancy and some clients have left only to find larger space thanks to the pace of their initial success. There are currently some 350 people working in the 120 occupied containers in a wide range of sectors. Despite the East Endâ€™s reputation as a haven for hipster industries, the profile of Containervilleâ€™s clientele reveals a much more nuanced picture. As graph 1 shows, business services make up more than a quarter of the firms with media and arts companies not far behind, broadly reflecting the make-up of corporate London outside the financial services industry. Other sectors represented include food & drink, consumer services, health and beauty, retail and even manufacturing.
Since the site opened in 2015, it has grown swiftly with occupancy almost doubling every year since. This has created an influx of jobs. While a third of the businesses are sole traders, according to our survey (graph 2), that is not a surprise given the early stage that many start-ups are likely to be in within the first two or three years. However, around one in 12 have a workforce of eight or more and a similar share have at least five people. A quarter of firms have two people and a further quarter have between two and three. Our survey also showed that the average age of the entrepreneurs and their work colleagues is relatively young: more than a third are in their twenties and over half are in their thirties, indicating these are entrepreneurs at the start of their journeys (graph 3) â€” although of course age is not determinant of entrepreneurial spirit.
Graph 1: Containerville by sector; number of firms. Tenants operate across a diverse range of sectors.
Manufacturing Retail Other Health and beauty Consumer services Food & drink Media & arts Business services
Graph 2: Employment creation. Two-thirds have more than one worker.
Graph 3: Employment by age bands; percentage of 24 firms. Predominantly young workforce.
Rough age grouping of workers
six and more
An environment for ACE businesses
The way that Containerville has been constructed and the way in which it operates contributes to environmental sustainability, a value that is key to the agenda of the Max Barney Estate. By using upcycled containers, the developers made a positive use of the large pieces of metal that otherwise are often left to rust, creating an eyesore for neighbouring communities, and are a pollution hazard and a cause of creating urban blight in the areas where they are dumped. Containerville gives these boxes a new life as well as providing a base for up and coming businesses. For a long time London has sought to reduce the amount of pollution from car transport in the city. However, thousands of people continue to commute into the capital by car every day and too often large office developments have attached underground parking while many fail to offer facilities for cyclists. Containerville has acted to break that trend. Neither of its two complexes of units has on-site parking but does have facilities to secure bikes. They are also both close to the London Overground railway network thanks to Cambridge Heath station just five minutes’ walk away. As a result, Containerville can boast a much lower use of car travel for commuting than the average for London as a whole.
More than half of employees either cycle or walk to work and a quarter use public transport such as a bus or one of the railway lines that come near Containerville according to our survey (graph 4). Only 12% drive to work. This is a far more environmentally friendly position than inner London (the government region that includes Tower Hamlets). According to statistics from the Department of Transport¹, fewer than one in five people (18%) walk or cycle to work. While 60% take public transport more than a fifth (22%) drive to work — almost double the rate at Containerville (graph 4). That can partly be explained by the fact that our tenants and their employees tend to live locally. Our survey found that three-quarters live in Tower Hamlets or its neighbouring borough Hackney, while the rest come from other parts of London with none commuting in from the Home Counties. This highlights the contribution that Containerville makes in terms of both reducing car use and providing jobs in its local area.
¹ Usual method of travel to work by region of workplace: Great Britain, October to December 2017
Graph 4 (A): Containerville travel to work
Graph 4: Containerville has much higher rates of cycling and walking to work.
Cycle or walk Public Transport Drive Other Graph 4 (B): Inner London travel to work
Why containerville works for today’s start-ups
Containerville’s near-100% occupancy is proof in itself that it is a very attractive proposition for small but fast-growing entrepreneurial businesses. Our survey of current tenants showed that location and affordability were by far the most important reasons cited for setting up in Containerville. The extensive railway links and bus routes surrounding Containerville, which explained why many tenants use public transport, have clearly added to its advantageous location (Graph 5). The high number of companies citing price as an advantage makes sense when one considers the cost of office space in London. Containerville’s £12,000 annual rent, which
includes internet, electricity, water and service charge, is highly competitive when compared with other areas in east London and the City of London. We have used data from a reputable survey of occupancy costs in central London districts as a comparator² (graph 6). Taking the 285 sq ft space of a container, Containerville turns out to be less than half the cost of many City districts that are in excess of £30,000 a year for the same space and is 37% cheaper than Stratford, which is the cheapest zone in east London (and indeed all of inner London) at £19,300 a year. ² Central London office market report. Q2 2019. JLLDecember 2017
Graph 5: Location and price win tenants (respondents could choose three reasons). Almost all companies cite location and price as a lure.
Transport access Physical security Local amenities Like-minded people Lease terms Services provided Price Location 100
Why Containerville works for todayâ€™s start-ups
Graph 6: Cost of renting 285 sq ft; ÂŁ per year. Containerville boasts a cost advantage. Source: Central London office market report. Q2 2019. JLL
Graph 7: Alternative sites considered by tenants.Strong demand for shared workspace from start-up firms.
Percentage Number 35
0 Other workspaces provider
Working from home
Leasing own building
Buying a building
Looking outside London
But it is important to stress that the attraction of Containerville goes far beyond price and location. As graph 5 showed, the services that Containerville provides is a big lure. These include high speed internet access; double glazed windows; basic kitchen unit; ceiling lighting; and perimeter trunking for plug points. There is disabled access for ground floor containers, while the site comes with strict security and CCTV coverage. Fences and gates are locked every night, and tenants have 24hour access. There are also shared toilets and showers on site, along with secure bike storage.
Several tenants also cited the terms of the lease which includes a break clause after the first year. Commercial leases often run for five to 10 years, which is a major commitment for a small startup firm that may be at the launch or the early development phases of their business. Traditional leases often come with several strings attached such as a requirement of a personal guarantee by the business owner to cover fees for the property even if the business fails. This can be a serious risk for new companies. This may explain why only a fifth of tenants in our survey said they looked at commercial leases and just a handful had considered buying a unit. Almost two-thirds of tenants said they had looked at alternative shared workspace providers before choosing Containerville (graph 7).
Containervilleâ€™s success stories
Each of the 140-odd businesses that make up the Containerville family has its own unique story that explains why Containerville was the ideal space for their company. But, as the case examples on this page show, there are some common themes that stand out: the location, the compact size, the price and the flexibility.
Containerville’s success stories
Case no.1: MAYOR Productions A focus on price and flexibility
When Fabio Mayor was looking for a new base for his fast-growing boutique production agency, MAYOR Productions, he quickly realised that neither a shared workspace nor a leased office would work for him. “I was working at home but had to say ‘no’ to a couple of jobs. That gave me a kick in the butt to look for offices.” he says. “But lots of the places I was looking at were co-working spaces whereas I needed a place for myself that I could customise for each occasion.” The idea of setting up editing computers or occasionally needing to take all the desks out for a project would not work in a shared space. “The fact that this was my own unit and I can do pretty much what I like with it was very attractive,” he says. He also looked at taking on an office let or a space under a railway arch, but all the options were way outside his budget. Fabio, who moved into Containerville’s second site when it opened in February 2019, says the price of renting a container was very attractive
as it meant the risk he was taking on was much lower. “The moment I saw Containerville it felt like it ticked so many boxes that I had to do it.” MAYOR, whose clients include major brands such as Adidas, Burberry and Diageo, both produces advertising campaigns for clients and represents the photographers and film directors needed for the projects. Fabio says he collaborates with some of his neighbouring tenants in Containerville. “Because we are at a stage where we are all in a similar point in our professional careers, it makes for a very nice community.” Fabio plans to use the next one or two years to build up his customer base, which means at some point he may need more space. At that point he may take a second container to accommodate that growth. “The idea is to bring more people on full time as projects become more regular,” he says. “I would like to stay in Containerville as it really suits me.”
Containerville’s success stories
Case no.2: E2Architecture A solid foundation for a growing business
Sam Cooper realised he needed a new home for the consultant architects practice he founded when the firm with which he shared an office in Shoreditch decided to move out. The space was bigger than he needed, and he had no appetite to carry on sub-letting.
E2Architecture has also taken full advantage of the tight network of businesses on the site. Sam has commissioned a carpentry firm to trim the desks, uses a printing company at Containerville and even gets his hair cut there. “There are definitely benefits from having neighbours.”
Containerville appealed instantly because of the short lease and the flexible terms that suited the stage he was at with the firm, which specialises in mixed use and residential developments, both new build and refurbishments.
The firm currently has three architects in the office and Sam says that it could comfortably expand to four people in the current container. Beyond that, he will have to think about either taking another container or taking a larger unit in the next phase that Containerville is rolling out.
“We did consider serviced offices or a WeWork type of arrangement but with Containerville it’s just nice to have your own space with your own front door,” he says, pointing to the benefits of an inner London location without the congestion of Shoreditch. “It’s a local area and you can stroll down Broadway Market or take a walk down the canal,” Sam says, adding that he can now walk to work since he moved into Containerville in April 2019.
“Whether it is a second container on this site or taking other offices in the building adjacent is quite an attractive option as it’s nice to know that if you stay within the Max Barney Estate they will be pretty flexible.”
Containerville’s success stories
Case no.3: Lila Loves
Flexible space works for dog groomer
Lila Loves is one of Containerville’s newest clients. Founder Cornelia Panayiotou opened her dog grooming business in August 2019. Lila Loves is a one-2-one grooming salon, which means that she cares for specific animals such as nervous puppies, elderly dogs and ones with disabilities.
Another aspect of the site that appeals to her is the fact that she has the freedom to design and adapt the working space to match the needs of her business. This was particularly important for Lila Loves as she needed to install a dog bath, a counter and many other pieces of salon furniture.
Cornelia was keen to base her business in East London as she saw a market opportunity given a lack of dog groomers in an area with many pet owners. “I didn’t find any spaces that I liked but when I saw Containerville online, the space looked ideal and so was the location,” she says. “I instantly fell in love with Containerville.” She had looked for salon spaces in the north London borough of Enfield where she lives but there was nothing suitable.
For Cornelia, Containerville is a great community. “Everyone is so supportive of each other!” she says. “We want to all help one another which I think is very important and this makes me very happy for choosing Containerville.”
Lila Loves only takes in one dog at a time so Cornelia is the sole worker. She relishes the community feel of Containerville which means that although she is on her own in the salon, she never feels alone at work. She says that an important factor that made her choose Containerville was the price of the rent. “As I am a new and small business, I needed rent that was affordable and very reasonable for the area,” she says.
Looking ahead, Cornelia says her immediate goal is to build up her clientele. “I would be happy to stay at Containerville for a much longer time than I had expected. Containerville has really exceeded my expectations.”
Containerville’s success stories
Case no.4: Batch.works
Containerville is perfect package for 3D printer
Julien Vaissieres describes the container that houses his 3D printing business as the smallest factory in London. “At one end you have the office and kitchen and then there is the design, production, packaging and shipping, so it is a full supply chain in one container,” he says. He moved Batch.works, which has worked with brands including Paperchase, Sketch London and the new Hoxton co-working space ‘Working_ from’, in April 2018 after the rent on his shared factory became unaffordable. He did consider the idea of another shared factory or a co-working space but decided that involved too much risk. Once he heard about Containerville he realised it was the ideal option as it was ready for him to move into and he could bring and install his own machinery. He was also attracted by the fact he would not have to take out contracts with suppliers of services that come with the Containerville package. “That can be a real nightmare,” he says. “Containerville is unique because you get your own private space and own address.”
Currently the company has Julien and an intern as employees while he works with outside suppliers for inputs such as web design and PR and advertising. But he has eyes on plans for expansion. One option is to take over a neighbouring container to double his space. He values the greater flexibility he would have versus a commercial lease as he could take advantage of the break clause in the lease or sub-let some space if business conditions changed. “But I think that the real value is about the whole community as you have more than 100 business around you, which is quite unusual,” he says. Julien says that he has benefitted from the close proximity of other firms as he has supplied products to some neighbours and bought services from others. “Everyone comes across each other every day, which is a real strength and something that is not available somewhere else.”
Containerville’s success stories
Case no.5: Karma Cans
How Containerville was a stepping stone for expansion – having own space was essential ingredient for caterer
Eccie Newton and her sister Gini realised they needed to find their own space for their corporate catering businesses when they saw potential clients and chefs were put off from working in a sticky, windowless basement of a Soho night club. “It was so incongruous with what people expect of you,” Eccie says.
Fortunately, they were able to move into a larger space nearby on Pritchard’s Road also owned by Containerville from which they now deliver 400-600 meals a day to companies across London including Nike, Facebook and Microsoft. There are nearly 1,000 Karma Cans recipes, developed and tested in their kitchen.
Their search for new premises was fruitless as no landlord wanted them to build a kitchen in their space until they spoke with Containerville.
They also opened a new business next to Containerville on The Oval called Karma Kitchens that provides shared and private space for caterers to fill the gap in the market that Eccie and Gini encountered four years ago.
“They said ‘literally do whatever you want’,” Eccie recalls, adding that that degree of flexibility meant they could move in and set up a commercial kitchen in one of the containers, juggling the 285 sq ft space between food preparation in the morning and administration in the afternoon. “For the first time we felt that we were a small business and were going somewhere because we had our own space,” Eccie says. “Although it was only a small space, the power of something that is yours, with your name on the door, is priceless.” “It changes your business from something you do in the margins around other people’s operations into something that you are growing, and which gains its own character, its own personality and its own culture.”
They moved into Unit 1 on the ground floor in 2015 as one of the first tenants— but within seven months, the company had enjoyed such strong growth they realised they needed to find new space.
They now have major expansion plans for Karma Cans including opening kitchens in Canning Town, Camden Town and Wood Green that will take their space from 5,000 sq ft to 22,000 sq ft. “Containerville was a stepping stone on the way to a bigger unit,” Eccie says. “It gave us the time to figure things out before we launched a much bigger warehousing unit.” She says Containerville is ideal for small startups to do the groundwork at an early growth stage. “It provides a home for the business and the team because that is what you can’t get when you are sharing someone else’s space or doing it from your home. “You can’t imagine how much people’s mindset changes when they walk into a space that is theirs and that they have ownership over. Having space to grow into is one of the most important things and that is definitely what Containerville provides.”
The bottom line: Containerville’s economic bonus
Whenever a business sets up, establishes itself and grows, it creates a whole range of positive spill-over effects. It pays staff, buys in capital equipment and day-to-day supplies, produces turnover, and pays taxes to central and local government. As well as those direct impacts there are also indirect benefits to the supplier who receives new orders for goods and services. Economists also recognise “imputed” impacts, which is the spending done by the employees of the businesses and their suppliers that would not have taken place otherwise. On top of this are the central and local government tax revenues that are created. The companies that have set up in Containerville bring knock-on benefits to the local and London economy by employing people and buying in goods and services. These benefits would be
lost by looking only at profit and tax revenues. As graph 8 shows, fuller economic impact assessment looks at the direct, indirect and induced impacts: • Direct impact includes the economic activity and employment supported directly by firms • Indirect impact captures the impact from the supply chain as a result of its procurement of goods and services from firms in other sectors • Induced impact comprises the wider economic benefits from employees to the local firms and those created in the supply chain who spend their earnings.
Graph 8: How businesses bring economic benefits
Direct impact: the activity created and the jobs created by the business
Indirect impact: the benefit to suppliers of goods and services to the business, and the jobs and wages for their workers
Imputed impact: the activity generated and jobs created as a result of extra spending by workers engaged in the direct and indirect impacts
The bottom line: Containerville’s economic bonus
Containerville’s companies currently employ around 350 people. Whether they are the entrepreneurs themselves or their employees, they will all receive compensation, whether in cash or deferred benefits such as shares. Taking the UK’s median full-time gross weekly earnings of £569, that translates into £29,588 a year. Multiplied by the 350 people on site that translates into total annual earnings of £10.35m for a workforce that is predominantly residents in Tower Hamlets or Hackney. It is highly likely that specialised businesses that make up many of Containerville’s clientele will pay higher. Had those businesses located elsewhere, that income would have gone elsewhere. The indirect impacts are less easy to see but equally important. The Office for National Statistics uses input-output modelling to measure the employment multiplier effect — the jobs created as a result of the employment within Containerville. Taking the multipliers for the sectors from the national labour market data that correspond with Containerville’s tenants’ activities³, the average figure is for a multiplier of 1.6. This means that for every job created the equivalent of just over half of another job is created. In other words, the 350 jobs at Containerville have indirectly led to a further 210 jobs created elsewhere.
It is highly likely that many of those jobs will be created, and other existing jobs sustained, given the fact that the majority of tenants live locally. One way to illustrate this is to analyse the spending patterns of employees while at Containerville. We asked our sample of clients about their spending patterns while at work. A third said that they spent more than £100 a week locally, a third spent between £50 and £100 while the rest spent up to £50 (graph 9). If one makes a very rough assumption that a third spent £150, a third £75 and a third £25, then breaking down Containerville’s 350 employees into those groups would indicate weekly spending of £29,000 a week or £1.36m a year (assuming everyone has five weeks holiday). Asked how often they visited local establishments, almost half said it was a daily activity, while a quarter went out four times a week and another quarter two or three times (graph 10). While this is an admittedly outline assessment, it does give some indication of the scale of the positive impact of creating employment in a previous defunct area. ³ Other food products; Alcoholic beverages & Tobacco products; Soft drinks; Printing and recording services; Motion Picture, Video & TV Programme Production, Sound Recording & Music Publishing Activities & Programming And Broadcasting Activities; Retail trade services, except of motor vehicles and motorcycles; Other professional, scientific and technical services; Other personal services; Human health services; Other manufactured goods
Graph 9: Spending locally, per week (%); workers spend money locally.
£100+ £51–£100 £21–£50 £0-£20
Graph 10: Weekly visit to local shops; frequent use of local shops.
0 One a week
2/3 times a week
4 times a week
More than 4 times a week
The bottom line: Containerville’s economic bonus
Wider employment benefits Containerville offers its tenant companies the advantage of being clustered near to each other. As the businesses will work alongside each other in close proximity, this increases the likelihood of chance meetings, shared ideas and collaborative efforts. Economists call this agglomeration, and it has been used to explain the concentration of financial firms in London’s Square Mile and Canary Wharf and the density of manufacturing outlets in the West Midlands in the last century. The idea dates back well over 100 years to the British economist Alfred Marshall who identified the benefits of clusters or industrial districts⁴. Almost a fifth of tenants in our survey said that they had found a partner or a supplier within Containerville as a result of having set up there, while a further 8% said they had learned a new skill or business practice (graph 11). As Containerville expands in size, this cluster effect will become more significant, which in turn will lead to an increase in the value of that agglomeration. There are also wider social benefits accruing from a formerly vacant site now being occupied such as reduced crime and vandalism, but those are hard to monetise. ⁴ Marshall, A. (1890): Principles of Economics. Macmillan. London.
Graph 11: Benefits of Containerwille (%); cluster benefits.
Itâ€™s cheaper than alternatives Enable to scale up quickly Found suppliers / partners on site Have learned from others Other
The bottom line: Containerville’s economic bonus
Containerville tenants tend to be engaged in high turnover activities, which reflect the large number operating in business services such as architecture and marketing, as well as in the media and arts sub-sector that includes many high value-added activities such as video and TV programme production, sound recording and music publishing. Our survey found that more than 40% of tenants believed they would turn over £300,000 or more in their current financial year. A further 15% will generate turnover of at least £200,000 and the same share anticipated turnover of £100,000. By taking the share in each turnover group in graph 12 and multiplying that by the midpoint in the band (and £350,000 for the top category), we estimate gross annual turnover of £78.8m coming into Containerville’s resident companies. As well as employing people, businesses generate economic activity in the form of turnover that requires them to buy in goods and services, thereby benefiting the local supply chain. We have estimated the output multiplier impacts of Containerville members on the wider economy, based on the ONS’ output multipliers for the sectors that cover Containerville’s clientele. The average multiplier is 1.54 which
means that every £1 of output generates 54p of indirect benefit for other companies in the supply chain. Using the multiplier of 1.54, we estimate that that activity brings a further £42.6m in indirect and induced benefit. Of course, today’s economy is based on online transactions which means it is hard to know how much of that extra benefit will come to local businesses, but it is fair to assume that a portion of it will do so. One aspect of that is the direct procurement carried out by the companies. Although this does not capture the indirect and imputed benefits as a result of extra spending by those supply chain businesses, it gives some indication of the immediate benefit. Unsurprisingly the procurement budgets are less than the average turnover for companies, with just over half of companies in our sample giving a budget of less than £50,000. However, as graph 13 shows, annual procurement bills for some companies are in excess of £300,000 a year. Again, taking the share in each turnover group in graph 13 and multiplying that by the midpoint in the band (and £350,000 for the top category) gives a total procurement spend of £35.2m a year. Again, by applying the 1.54 multiplier that would mean an extra second-round gain of £19.0m.
Graph 12: Tenants’ annual turnover; turnover as high as £79m.
0 Under £40k
Graph 13: Annual procurement budget; Containerville feeds the supply chain.
The bottom line: Containerville’s economic bonus
Like any business, Containerville’s tenants bring in revenues to the government in the form of corporation tax, income tax, national insurance, business rates and VAT on goods and services bought by businesses. Earlystage businesses may not turn a profit in their first years, and, for reasons of privacy and competitiveness, they are reluctant to reveal their profit figures. However, as these businesses move into profit, they will pay corporation tax of 20% on profits below £300,000 and 21% above that. Businesses are also liable for business rates. However, companies in Tower Hamlets with properties with a rateable value of no more than £12,000 get 100% discount. While that will raise revenue, the purpose of the discount is to encourage businesses to launch and at Containerville it has had the desired effect. This will bring direct benefits in the form of income tax, and indirect and induced benefits in the form of Containerville’s tenants and employees spending the money they have earned (and paying VAT on that expenditure), and jobs created as
a result of that. Those salaries and wages will incur income tax. After subtracting the £12,500 tax-free allowance, someone on the average national median wage would pay £3,417 income tax and £2,504 in national insurance. Together, across the Containerville units that amounts to £2.07m going to HM Treasury from its workers. Both businesses and their employees will pay VAT. Looking at the employees, average weekly household expenditure in the UK was £572.60 in the financial year ending 2018, or £29,775 a year, almost exactly in line with our estimate of average earnings. Hopefully Containerville’s workers are saving but were they and their families to spend their £10.35m with VAT at 20%, this would deliver a tax take of £2.07m (although of course items such as petrol carry higher rates and goods such as food is zero rate). Much of that money would go to national organisations such as supermarkets, entertainment companies and mortgage firms. However, our estimate of local spending of £1.36m a year would alone raise £271,850, which gives some indication of the direct benefit.
Why Containerville is important
This report has shown how a shared workspace development such as Containerville brings economic benefits in the form of tax revenues, economic activity via the supply chain and second-round economic boosts from spending by its workers. It has also highlighted the social benefits such as lower pollution and greater local employment. However, projects such as Containerville serve a wider purpose of providing small-scale, affordable and flexible accommodation for start-up companies. Britainâ€™s cities and London in particular are awash with luxury high-grade and high-rent office developments that are occupied by large, established companies. Startups with a minimal capital budget are often impeded in their development because of the expensive rents and onerous conditions that can come with traditional leases. SMEs are rightly seen as the backbone of any healthy economy; they drive growth, provide employment opportunities and open new markets. Helping small businesses jump this hurdle is crucial to any economic strategy that seeks to nurture companies with the potential to create new jobs and to find new export markets (something that will be particularly important whatever the outcome of the Brexit
process). There are 5.42m micro businesses ranging from zero to nine employees out of a total of 5.67m businesses in the UK. These businesses account for 33% of employment and 21% of turnover. Containervilleâ€™s growth is a strong signal that there is demand for this type of affordable and flexible workspace. Having gone from a handful of occupiers when it opened in 2015 to around 120 at the end of 2019, there is potential for greater growth as Containerville continues to expand. The plan is to get to 200 businesses by February 2020. A good omen is that Tower Hamlets council has welcomed the development, and even encouraged Max Barney to apply for full planning permission. It is fair to say that Containerville has also played a role in the regeneration of East London that has been one of the legacies of the London Olympics 2012 in Stratford. The success of Containerville has fuelled an ambition to expand and to establish further sites all across London, to other British cities and perhaps even internationally at some point. The aim is to create a product that supports more businesses, that gives small businesses what they need and create an environment where they can thrive and grow.
Since setting up in an industrial part of London’s East End in 2015, Containerville has become home to around 120 start-up businesses and will soon play host to another 80 entrepreneurs. It has enjoyed robust growth, in some years doubling the number of tenants. The businesses it has attracted are a diverse mix across the media, food and drink, creative arts, and business and consumer services. What they have in common is that they are innovative companies with their gaze firmly set on growth. This report has looked at the benefits that Containerville has brought to its local area, both in terms of social gains and in terms of direct and indirect economic advantages. Containerville has met a clear need for affordable and flexible workspace within a city where commercial leases are often very expensive and come with strings attached. The large number of businesses citing the price, the lease terms and the services offered within the package are a sign that entrepreneurs appreciate what Containerville offers.
The development has brought clear environmental benefits. The containers are re-purposed former railway and shipping containers and have been given a new positive life, rather than being consigned to the scrap yard. Car use by Containerville tenants and workers is a fraction of inner London as a whole, while the use of both transport and cycling and walking is much higher. Tenants say that they benefit from working in close proximity with similar like-minded entrepreneurs with many saying that they have either received important business tips or embarked on successful partnerships with their neighbours. By bringing hundreds of new people into a previously run-down area, life has been injected into a moribund neighbourhood.
Containerville has brought economic gains to the local neighbourhood and the wider area. The analysis looks at the economic effects through three different but connected impacts: employees spending their earnings; businesses’ activity benefitting local supply chains; and tax revenues raised. Using national labour market data, we have imputed a total income going to tenants and their workers of some £10.5m. By analysing tenants’ local spending patterns, we have estimated that they spend in the region of £1.36m a year in the local area, which will benefit local businesses. The creation of jobs at Containerville will lead to the creation of jobs elsewhere in the economy. Using the government’s employment multiplier for the sectors represented at Containerville, we estimated the 230 jobs have led to 138 new jobs elsewhere. Businesses will deliver gains to business both locally and nationally through their procurement budgets. Containerville’s business tenants will generate economic activity that we have estimated at £78.8m a year. Using ONS output multipliers, that would deliver a further £42.6bn of indirect and imputed benefits. To demonstrate this we analysed tenant companies’ procurement budgets and estimated them to be worth £35.2m a year. Again, applying the 1.54 multiplier that would mean an extra second-round gain of £19.0m. While we are aware that these estimates are based on rough calculations, they do give some insight into the impact. By creating 350 jobs, generating turnover of £52m year and earnings of £10.35m, its presence has clearly brought direct and indirect financial benefits to the neighbourhood and the wider area. But the positive impact goes beyond that and includes breathing new life into an old area and filling a once derelict zone with new activity and fresh faces.
To find out more about Containerville contact Shraga Zaltzman Email: firstname.lastname@example.org Phone: 07539 650 088 The Max Barney Estate 4th Floor 168 Shoreditch High Street London E1 6HU 020 7583 5555