Oil and gas sector research shows sector is ‘significant’

Recent research by Professor Colin Mason of the Hunter Centre for Entrepreneurship into the state of Scotland’s technology businesses shows that the Scottish oil and gas sector is very significant, both as a source of high growth high tech companies and as a customer for tech firms in other industries. Nearly one-third of all Scottish-owned technology firms are linked either directly or indirectly to the North Sea oil and gas sector.

The research, commissioned by Scottish Enterprise and co-authored with Ross Brown, revealed that:

• High-tech firms are more likely to achieve high growth than non-tech firms
• However, fewer than 20% of high growth firms in Scotland are in high tech sectors
• Moreover, compared with the UK as a whole, high tech high growth firms in Scotland are smaller and there are fewer large technology businesses.
• This may reflect the acquisition of Scottish owned companies – only 30% of established technology companies are Scottish-owned.

Looking in greater detail the research shows that:

• High tech firms are diverse – in terms of age, size and the nature of their activities. They include both manufacturing and service-based companies. However, they are predominantly SMEs. Many are far removed from the ‘white coats’ stereotype of technology businesses.
• They are highly export-oriented. Several of the larger technology firms also have a significant physical presence in other countries.
• High tech firms are competing on their technology and domain knowledge, capabilities and offering. IP, patents and formalised R&D are much less significant than might have been expected.
• The oil and gas sector is very significant – both as a source of high growth high tech companies and as a customer for tech firms in other industries. Nearly one-third of all Scottish –owned technology firms are linked either directly or indirectly to the North Sea oil and gas sector.
• In contrast, manufacturing firms in the ITC sector suffer from being distant from their major customers which are typically in North America and the Far East and the lack of major UK ‘champions’. However, access to markets does not appear to be as restrictive for software businesses – the study identified several successful Scottish-based software companies successfully competing internationally.

The research supports the emphasis that Scottish Enterprise gives to the need to build companies of scale in Scotland, both in terms of their direct economic impact in terms of jobs and exports but also their potential significance as a source of local demand through their supply chain and which is exemplified by the oil and gas sector.

The research was reported on the BBC News web site (Scotland Business) on July 25 and in The Herald on August 7