Scotland’s life sciences sector became the “biggest destination” for tech investment thanks to a boom in healthcare innovation during the pandemic, according to new analysis.

The government-owned British Business Bank found that investment in Scotland’s smaller life sciences companies reached £61 million during the first nine months of 2021 – 42 per cent higher than the figure for the whole of 2020 (£43 million).

Its research shows that the sector emerged as the most popular destination for equity investment into smaller technology firms in Scotland, representing 37 per cent of the total figure.

Equity investment into smaller businesses in Scotland’s thriving technology industry as a whole reached £163 million by the end of the third quarter of 2021, 36 per cent higher than 2020’s total of £121 million.

Using Beauhurst data that tracks equity investment in high-growth businesses, the British Business Bank found that life sciences was ahead of software for investment in smaller businesses in Scotland’s technology sector. Software accounted for £37 million, a 23 per cent share, during the nine months to the end of September 2021.

During the build up to Glasgow hosting the Cop26 UN climate change conference last November, smaller businesses in the clean technology sector attracted £24 million of investment – up four-fold on the £6 million recorded during 2020, with data from the final three months of 2021 still to be captured.

The findings follow the British Business Bank’s Small Business Finance Markets report, which recently found that total equity investment in Scotland’s smaller businesses reached £403 million during the first three quarters of 2021 – exceeding the entire previous year’s £279 million by 44 per cent.

British Business Bank’s Mark Sterritt/Supplied

Mark Sterritt, UK network director, Scotland, at the British Business Bank, said it is encouraging to see a significant increase to equity investment in Scotland’s smaller tech businesses.

He said: “These are the high-growth, innovative companies that will help drive the wider economy in the years ahead and that they are looking to equity as a way of funding recovery and growth points towards a renewed sense of optimism after a highly challenging 2020.

“Although there are clear headwinds in the form of cost inflation, supply chain pressures, and geopolitical tension, 2022 will hopefully see a return to more normal trading conditions as the year progresses.

“With that, we would also hope to see more companies switch to focus on growth having understandably been in survival mode for much of the past two years.”

He added that it is more important than ever that businesses can access funding to achieve their goals.

He said: “We have a range of programmes across the country already in place to address geographical funding gaps – with details of our £150 million regional fund for Scotland to be announced in due course.

“In addition, last year we launched our Future Fund: Breakthrough programme to support innovative smaller companies with high growth potential across Scotland and the UK.”

In 2021, the British Business Bank announced the launch of its £375 million Future Fund: Breakthrough fund, which aims to support private investors co-investment with government in high-growth, innovative firms.

The programme began making its first investments in the first few months of 2022.