Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Outlook good for UK tech firms, who still envy US

by
25th Dec 2005
Save content
Have you found this content useful? Use the button above to save it to your profile.

Even though UK technology companies are responding well to the economic conditions and government support for their industry, nearly two-thirds of them think they would be more successful if they were based in the USA.

The industry's ambivalence was highlighted by the 2004 Grant Thornton Technology Survey, which contacted 200 "mid-corporate" technology companies in the US and the UK.

British companies were less positive about their prospects and just under half (48%) thought the UK had the best regulatory environment for their business. And 63% of UK companies felt they would stand a better chance of success if they were in the US.

But GT partner and head of its technology group Wendy Hart warned: "They need to consider the fact that they would be operating in a more competitive marketplace than on this side of the Atlantic. Perhaps the reality of the 'American Dream' might not be quite as rosy as they envisage."

For example, the survey found only 11% of UK respondents worried about the state of the economy, compared to 20% in the US.

"With a flourishing and stable economy, an improving regulatory environment and an apparent increase in the willingness of government to contemplate direct state support for technology companies, the UK technology sector can look forward positively."

The survey highlighted the difference in maturity between the two technology rivals. The average US technology business is between 12 and 15 years older than its equivalent in the UK. Funding issues are more important for UK companies that are at an earlier stage in their lifecycle; 38% of UK companies surveyed considered the funding environment difficult, compared to only 30% in the US.

Grant Thornton supported government funding and tax breaks for UK tech companies to encourage the profitable transfer of ideas from the laboratory into commerce, but noted recent research that showed the greatest share of government finance ended up with very large technology corporatoins.

"This, together with trends in venture capital towards larger deal sizes, leaves early and expansion technology companies with a funding gap, which will inevitably prejudice the ability of the technology sector in the UK to grow, thrive and become self sustaining," Hart warned.

The survey showed that venture capital and private equity activity were picking up. In the UK, private equity investment in technology, including venture capital, was 50% higher in 2003 than in 2002 rising to £817m. More than £1bn has been raised on AIM in the first half of 2004, more than all the money raised in 2003, and double the amount raised in 2002.

"Most of the money is going to those businesses with a good track record and ideally showing profits. Investors are not interested in 'blue sky' propositions," commented GT corporate finance partner Philip Secrett.

Despite the UK moans about funding difficulties, the study found that many technology companies think floatation is easier in the UK than in the US.

The survey concluded that while the US model has worked well for the past two to three decades, there are signs that the pattern of research, development and commercialisation in the technology sector is shifting. The move from large in-house research facilities towards a more fluid environment, where ideas are more readily exploited, favours UK mid-corporates, said Hart.

Tags:

Replies (1)

Please login or register to join the discussion.

avatar
By Simon Sweetman
30th Sep 2004 15:06

IR35/S660A
Why does the editorial comment on technology startups refer to these things ? While they are a pain, one refers only to personal service companies working for clients and S.660A only affects people who are taking a route to reduce their tax bills (a legitimate route, in my view, but far from inevitable !). A real technlogy start up company developing things for itself is not likely to be affected - the problems with actually getting R&D Tax Credits are much more to the point.

Thanks (0)