UK technology sector well positioned for future, argues Deloitte report

July 25, 2005

Brussels, 22 Jul 2005

The UK technology sector is extremely well positioned to exploit future opportunities and capture a significant share in certain potential global markets, according to a comprehensive review of the industry by consulting firm Deloitte.

The report comprises a review of the sector's performance over the last five years, an analysis of the impact of education, government policy and financial institutions on the sector, a forecast for the next five years, and Deloitte's conclusions and recommendations.

In the opinion of figures from business, government and education that were interviewed for the review, the UK technology fared positively but inconsistently between 2000 and 2005. While the UK ranks as the fifth largest technology exporter in OECD countries and has the highest proportion of employment in the technology sector of any developed country, 'There is certainly scope for improved performance over the next five years,' according to the report.

A major area of concern for the analysts is the performance of UK-headquartered technology companies, which have seen inconsistent growth in recent years. It is in the country's interest to have more nationally headquartered and profitable technology companies, says the report, as these have the potential to deliver intellectual property based revenues as well as to create employment and tax revenues. To achieve this will require all parties involved in the sector to work together to strengthen the UK's position, it concludes.

In terms of the impact of the UK's education system on the high tech sector, Deloitte believes that universities are performing well in offering an environment in which technology students can thrive. The challenge now is to bring technology to the general student body, as well as to provide technology training to UK employees throughout their working lives.

It is acknowledged by respondents that the present UK government believes strongly in the value of technology for the UK. However, some participants inferred that the government's enthusiasm for technology may be 'slightly ahead of its understanding of it'. There are no complaints about the government's macroeconomic framework, but when it comes to microeconomic conditions, the sector would benefit from enhanced taxation policies, improved funding for basic research and the development of more clusters.

The UK's financial sector is world leading and is itself a large customer of technology, yet following the dotcom crash there is a sense of mistrust between the two sectors, and Deloitte feels that a better dialogue between the two sectors would be beneficial. In a European context, eight out of the ten most significant technology initial public offerings (IPO) since January 2004 have been on London stock exchanges, the report notes, although UK IPO activity and value 'pales into insignificance' when compared with the US and China.

In terms of the outlook for the sector in the coming years, Deloitte believes that with its 'competitive stance' on stem cell research and a growing body of expertise in biotechnology, microelectronics, software development and other areas, the UK 'has the potential to capture significant share in some high potential global markets'. The critical factor will be whether UK technology companies are able to add exceptional management skills to their technology development capabilities.

The review concludes with a list of recommendations. All stakeholders in the technology sector would benefit from enhanced dialogue and cooperation, says Deloitte, before adding that it is a shared responsibility of the education system, government, businesses and individuals to establish the next generation of technology workers. A sense of commercial awareness should be integrated into technology education to improve the sector's innovativeness, and the high tech sector must 'specialise to survive' and pick only those battles it can win. The report concludes by calling on those in the technology sector to keep asking 'how much can we grow?', and 'where can we dominate?'

For further information, please consult the following web address:
http:///www.delo itte.com/dtt/article/0,10 02,sid%253D2847%2526cid%253D88659,00.htm l

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