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77% Jump in Scottish Software Startups

Brian Baglow

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Scotland Tech Sector Jobs

Scotland’s software sector appears to be booming, as the number of start-up companies in the sector increased by 77% in the last 12 months.

New research by accountancy firm RSM shows that the number of new software companies being created in Scotland rose by 77% of the last year, the second highest growth in the UK.

440 new development and publishing companies were started in 2017, according to the report, a 77% increase on the 249 companies launched in 2016.

The growth gives Scotland the highest growth in the UK behind the North East of England, with growth of 78%, growing from 97 incorporations in 2016, to 173 in 2017.

Across the UK, over 10,000 software companies were created in 2017, with every region showing growth. RSM used four separate SIC codes to identify the companies it analysed, capturing

  1. publisher of computer games
  2. other software publishing
  3. ready-made interactive leisure and entertainment software development
  4. business and domestic software development
Year of Incorporation20162017Change
Region%
North East (England)9717378
Scotland24944077
London2407423876
West Midlands (England)27247073
Yorkshire & the Humber (England)24540867
East Midlands (England)22533750
East of England45266046
South West (England)35450342
South East (England)925129640
North West (England)55070729
Wales12215527
Northern Ireland9811921
Other304510
Grand Total63001001659

The new research follows a recent survey by Scotland’s digital IT trade body, ScotlandIS, which showed 80% of respondents in the country’s digital technology sector were optimistic about their future in 2018. Nearly one third predicted more than a 50% increase in their sales, while 80% said they expected to increase their employee numbers over the next twelve months.

A Vibrant and Supportive Tech Ecosystem

Ross Stupart, partner at RSM in Edinburgh, told Insider: “These figures show very clearly that despite the fears of a post-referendum slowdown, Scotland’s tech sector is growing at a healthy rate.

“There are a number of reasons for this. Scottish universities are playing a key role in developing and nurturing exceptional talent and we continue to attract the world’s brightest and best.

“Organisations such as EIE , FutureX Innovation, Start-up dinners, Turing Festival and Entrepreneurial Scotland are also contributing significantly in creating a vibrant and supportive tech eco-system. Entrepreneurs are able to gain good access to finance, either through traditional sources of debt at relatively cheap rates, or from venture capitalists, angel networks and private equity funds.”

Stupart added that the UK’s tax regime is also proving “an incredibly powerful tool” as firms take advantage of legitimate tax saving and incentive programmes. These include R&D tax credits, video games tax relief and the Patent Box regime.

“There is undoubtedly the political will to build momentum and generate further growth as part of the government’s overall industrial strategy,” he said.

Longer Term Uncertainty

“However, there are some clouds on the horizon. While many in the sector will be cheered by the news that EU nationals will continue to be able to come and work in the UK during the transition period, the longer-term position is as yet unclear.”

“As interest rates start to rise, we may also see a shift away from venture capital and private equity as investors seek returns from safer investments. For now though, the funding environment is incredibly benign.”

Remarkable Growth

David Blacher, head of RSM’s technology, media and telecoms team said: “These figures show very clearly that despite the fears of a post-referendum slowdown, the UK tech sector is incredibly vibrant and growing at a remarkable rate.

‘There are a number of reasons for this. The UK’s universities are playing a key role in developing and nurturing exceptional talent. The country – and London particularly – is also continuing to attract the world’s brightest and best.

‘Entrepreneurs are able to gain good access to finance, either through traditional sources of debt at relatively cheap rates, or from venture capitalists and private equity funds.

Tax Incentives Encouraging

‘The UK’s tax regime is also proving to be an incredibly powerful tool in encouraging tech businesses, who take advantage of legitimate tax saving and incentive programmes. These include the Enterprise Investment Scheme, Research & Development tax credits, video games tax relief and the Patent Box regime.

‘There is undoubtedly the political will to build momentum and generate further growth as part of the government’s overall industrial strategy. However, there are some clouds on the horizon. While many in the sector will be cheered by the news that EU nationals will continue to be able to come and work in the UK during the transition period, the longer term position is as yet unclear.

‘As interest rates starts to rise, we may also see a shift away from venture capital and private equity as investors seek returns from safer investments. For now though, the funding environment is incredibly benign.’

Movers and shakers

Brian Baglow

Editor

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