Scotland’s tech sector recovers pre-pandemic verve

Scottish technology companies have recovered pre-pandemic levels of growth, according to research from ScotlandIS, a digital industry membership organisation that works with the Scottish government.

According to ScotlandIS, the nation boasts 3,900 digital technologies companies, and 100,000 people work in digital technologies roles.

The Scottish government has been supportive of such ventures as The Data Lab, an innovation centre tasked with enhancing the country’s economic output using data, and with creating high-value data jobs in partnership with the nation’s universities.

The recent growth in tech employment in Scotland has been driven by local tech startups and scaleups. It is the third-highest tech hub in the UK after the South East and London, and Scottish tech firms raised £446m in venture capital funding in the first three quarters of 2021, according to the Office of the Secretary of State for Scotland and the Department for Digital, Culture, Media and Sport.

In its 15th annual Scottish technology industry survey, ScotlandIS identified the biggest increase in growth opportunity in cyber security. Nearly one-third (31%) of Scotland’s technology businesses are now aiming at that sector as an opportunity in the year ahead. Data analytics, artificial intelligence and the internet of things also emerged as hot areas.

However, technology exports are in decline, with 2021 seeing a 4% reduction in exports to 56%, and one-fifth of Caledonian technology businesses have no plans to export in 2022. According to ScotlandIS, digital is the fourth-strongest export sector in Scotland, exporting more than £3.3bn.

As in the rest of the UK, talent is in high demand, with skills shortages identified in the report as a top barrier to growth.

Nevertheless, 72% of companies reporting increased sales. This marks a return to pre-pandemic levels of sales growth reported in 2019, after a significant drop last year (44%). 

The Scottish government’s economy secretary, Kate Forbes, said: “It is encouraging to see more technology businesses in Scotland reporting increased sales, in line with the return to pre-pandemic retail sales levels more generally.

“We want to establish Scotland as one of Europe’s leading startup economies – that is why the Scottish government is committed to the most radical reforms of the Scottish entrepreneurial system since devolution.”

ScotlandIS CEO Karen Meechan added: “Data gathered from this year’s survey gives clear signals that the tech sector is back in growth mode after weathering initial impacts of the pandemic.

“As it comes to the end of the academic year for many Scottish students, we are pleased to see how many organisations across the sector are planning to recruit graduates, but the year ahead will require continued collaboration across industry, academia and our education system to build a pipeline of talent within Scotland. We will continue to do as much as we can to support that.”