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Scottish Tech Sector Facing Serious Challenges Due to Coronavirus Pandemic

David Paul

,

digital tech

Many startups across the sector could be at risk of falling through the gaps for government support.

Business leaders fear the COVID-19 pandemic could have huge implications for the Scottish tech sector, according to a survey published today.

In the survey, conducted by Turing Fest, more than 100 tech startup founders and senior executives said the pandemic could deal a serious blow to Scotland’s digital economy by stifling innovation, putting promising early-stage companies out of business and destroying thousands of jobs.

More than half (52%) of survey respondents said the Scottish Government is currently doing too little to support entrepreneurs, while 17% said they were unclear about what support is available to businesses.

The survey responses suggest that the Scottish Government must do more to engage with the technology sector and implement a more proactive strategy to communicate with those facing significant challenges.

In an open letter to Holyrood, more than 50 Scottish startup CEOs and founders said that “current interventions, from both the Scottish and UK governments, will not adequately address the unique needs of high-growth Scottish tech companies”.

The letter called upon the Scottish Government to “act now to protect Scotland’s entrepreneurial future” and prevent high-growth businesses from going under due to the pandemic.

Brian Corcoran, CEO of Turing Fest, commented: “Tech startups can play a key role in rebuilding Scotland’s economy after this pandemic passes, but unless there is immediate intervention from the Scottish Government, many startups will not survive and the ecosystem that the Government, and others, have worked so hard to cultivate could be decimated.”

Ian Stevenson, Founder and CEO of Cyan Forensics added: “The current loan scheme seems to be only open to companies profitable enough to demonstrate repayment – which excludes growing equity-backed startups.

“The UK Government’s Future Fund is a great step for VC backed companies, but at present, it’s not clear how it can co-exist with the EIS investment that fuels many early-stage companies.”

When asked about the outlook for Scotland’s technology sector in the face of the pandemic, 95% of survey respondents said the disruption had already hurt their businesses. More than one-third (38%) said they have had to furlough staff, 21% are considering redundancies and half have had to freeze or scale back hiring entirely.

Respondents also called for more direct financial support during the pandemic lockdown. Around 79% said they wanted to see the government offer bridge grants to help businesses maintain their operations and 67% called for expanded R&D/innovation grants.

Employee wage subsidies were also identified as a key support mechanism by more than half (59%) of respondents.

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“Countries like France and Germany have already announced wide-ranging and highly supportive schemes for their tech industry, “said Paul Walton, Co-Founder and CTO at Boundary, “and whilst the UK government’s announcements last week were welcome, the rules of the scheme mean many Scottish companies will not be able to get support from it.”

Scotland’s digital economy businesses employ almost 100,000 people and contribute £6.6 billion to the economy. Scottish startups attracted £200 million in venture capital investment in 2019, reflecting a fast-growing and competitive tech sector that stands to become a major part of Scotland’s economic future.

David Paul

Staff Writer, DIGIT

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