According to a research report launched today by Deloitte, the business advisory firm, the UK has the potential to become one of the world’s pre-eminent technology nations. However the report, based on research carried out with over 50 of the country’s leading technology influencers, also revealed the UK’s vulnerability. In particular, international competition from China and India is expected to intensify, there is the possibility of an exodus of research and development, and too few UK-headquartered technology companies seem to be attaining global scale. The risk is that the UK may fail to exploit the next wave of emerging technologies and nurture tomorrow’s technology leaders.

“The question for the UK is how it can exploit what is currently a relatively advantageous position. We have a strong science base, good innovations in a number of important areas, a strong economy and a leading financial market. All stakeholders involved in the sector – the government, academic institutions, commercial companies and finance firms - need to work together to ensure that we capitalise on the next wave of technological advances now that the IT sector is maturing and consolidating fast,” comments William Touche, technology partner at Deloitte.

“While multinational technology companies make a major contribution to the UK’s economy, in the long term it is in the country’s interest to have more nationally-domiciled, profitable technology companies delivering intellectual property (IP) based revenues, in addition to creating employment and generating tax receipts. This is particularly important given the on-going reduction in the UK’s manufacturing sector.”

Key stakeholders in the UK technology sector:

UK government
The government is recognised as believing strongly in the value of technology in the UK and is seen as providing a platform for the sector to grow - with an economic and social environment that broadly supports UK-based companies and workers, as well as being attractive to multinational companies and foreign talent. However at a micro-economic level it was still felt that improvements could be made, particularly in regards to the funding of research, as well as provision of greater support from regional development authorities and development of cluster specialisations, such as that found in Cambridge.

UK education system
Feedback from the technology sector on the current standard of technology education in the UK is positive, although one area of particular concern relates to commercial aptitude. Touche comments: “Our research found that while the UK is generally adept at developing world-class subject matter experts, there is a lack of commercial application. We need to focus on questions such as “what problem is this trying to solve?”, or even just “so what?””

UK financial sector
The UK boasts one of the most vibrant financial markets in the world, whilst also being one of the largest customers of technology. However respondents felt that there was a degree of mistrust between the financial and technology sectors, catalysed by the dot com crash.

There was a consensus that better dialogue between the two sectors would be beneficial. The financial sector could improve its understanding of technology. Conversely, and more importantly, technology companies need to improve their ability to express themselves in commercial terms.

“AIM has an opportunity to become the de facto technology exchange for Europe according to respondents – particularly with the impact of Sarbanes Oxley on the US listing market. However it could do more to raise its profile – for example by launching a specific index for technology companies to focus greater analyst coverage,” comments Touche.

Outlook for the UK technology sector
“With a competitive stance in core research areas such as stem cell research, a strong and growing body of expertise in biotechnology, micro-electronics, semi-conductor design, software development, and opto-electronics, the UK has the potential to capture significant share of the international market.

“A clear message coming out of the research was the lack of communication between different groups in the UK’s technology sector. Whether this was the universities having insufficient dialogue with large technology companies, or angel investors being unable to reach out to potential investments, or small technology companies being unable to express their business case to potential customers, the lack of communication was quite evident.

“UK technology companies should not be shy about identifying, exploiting and even advertising the shortcomings of other countries, particularly if these proffer the UK competitive advantage. For example, the UK should market its position as one of the leading wireless providers in the world, as well as one of the safest places in terms of the capacity to create and protect intellectual property (IP). The UK technology sector should focus on areas in which it can specialise, rather than be caught in a commodity trap.

“Many the pieces of the puzzle are in place for the UK to become a leading international player in the technology sector – in terms of its primary research, economic environment and specialisations. What will be key to this success is for all the stakeholders in the industry – including the government, education and business sector itself – to draw together to exploit this strong position and improve its performance,” comments Touche.

Lord Sainsbury, Under Secretary of State for Science and Innovation comments on the report:
"The Government believes that science, technology and innovation are of critical importance to the future of UK industry, and I warmly welcome this report.  The Government must create the conditions in which innovation can flourish, and this report contains a number of ideas which will help us take the innovation agenda forward."

John Higgins, Director General, Intellect, comments:
“This is an excellent and timely piece of research. Its results should be considered by all those stakeholders with an interest in building an even better technology sector in the UK. I would strongly support the recommendations for better collaboration with the sector, improved relationships with the financial sector and the emphasis placed on the important proactive role the government will play in making this happen".

To read more information and to download The ball's in our court report (full report), read our latest summary.

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Notes to editors

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of £1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.