Scottish technology sector looks forward to long-term recovery

Scottish technology firms are preparing for a turnaround in the sector with an expected 20% boost in hiring and a near doubling in patent applications.

According to the latest quarterly trends survey by networking organisation Connect Scotland, more than half of young companies planned to recruit staff in the last quarter of 2003.

The representative sample of 50 respondents indicated that job numbers in the sector could rise by 20% – the largest intended increase since the survey began a year ago. The majority of companies, which on average employ 10 people, said they would be recruiting technologists, postgraduates with experience and managers with the ability to raise financing.

Andy McNair, director for Connect Scotland, said that the sector in large part seemed satisfied that there would be plenty of candidates despite predictions that top-up fees down south could lead to the best students choosing richer “Ivy League” English universities over Scottish institutions.

He said: “Nobody has said they are really concerned about future skills shortages, but maybe they aren’t thinking three years ahead.” He added that Connect would add specific questions surrounding skills shortages in future surveys.

One third of the respondents also said they would be making new patent applications – almost doubling the number of patents held by the group as a whole.

McNair added: “Patent costs are not cheap. When people are submitting these types of things, they have to make sure what they have is novel and has a realistic market. It demonstrates confidence in what they own and what they believe can be achieved.”

He added that these kind of investments indicated that many believed that the sector would see a long-term recovery rather than a six-month blip. Companies in the survey, typically just over three years old, were expecting to break even this year and to have a turnover of £5 million in five years.

More than half were gearing up to raise further financing and were searching for more than £500,000 – although many thought fundraising problems could be their biggest barrier to growth. “We still need more deals (up to £1m) to move the companies quickly along to the next level of business development and the bigger rounds of financing.”

Connect Scotland is hoping to further the process this year by holding three springboard events, which allow a selection of young hopefuls to pitch for money from various angel investor syndicates and venture capitalists. It has chosen 12 companies – eight privately traded and four spinouts – to present on March 25 in Glasgow. Another event, focusing on energy, will be held in Aberdeen for the first time later this year.

McNair said that many companies in the sector still lacked the marketing knowledge to impress some investors. However, the profile of survey respondents signalled a shift in business models and targeted markets. Many had planned to have revenues from other sources such as contract research or delivery of services while their core product was still under development, which demonstrates management capability to prospective investors.

The majority of companies were also from life sciences, with far fewer from telecoms and electronics than in previous surveys. McNair said that large amounts of money from funding initiatives such as Proof of Concept were being funnelled into bioscience related projects and thus strengthening the sector.

He added: “There’s definitely a large focus on this area. One of the reasons is that software, microelectronics, opto- electronics – types of technologies used in other industries like telecoms for a number of years – are now being applied in life sciences.”

By Julia Fields

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