Scottish tech firms are planning a ‘major employment drive’ with a ‘steadying’ financial outlook and increased demand from international customers, according to new sector analysis.

A survey by trade body ScotlandIS has revealed companies are increasingly looking to international sales to drive business.

The annual Scottish Technology Industry Survey, a temperature check on the sector, has shown 83 per cent of companies expect to increase their headcounts this year.

That is a seven per cent improvement on last year’s findings, with none anticipating cuts, while two in three (63 per cent) of the new jobs created are expected to be sourced in Scotland.

The technology sector already employs over 80,000 people in Scotland, and 15,600 new digital technology jobs are created annually. Overall, UK tech job vacancies increased by 30 per cent last year compared to 2021, reaching 77,000 in February. 

One of the factors driving the jobs boost is demand for services internationally. The ScotlandIS survey found that the number of tech companies planning to or already exporting is at its highest level (87 per cent) since the Covid-19 pandemic.

This reverses a decline in exports from last year. North America and Europe remain the top two export markets for Scotland’s tech businesses outside of the rest of the UK.

Karen Meechan, CEO of ScotlandIS, said: “The skills shortage has long been a challenge for the Scottish tech sector, but it is now mission critical. If we cannot fill vacancies and source talented people, the potential for growth will be stymied. The Scottish economy can ill afford to let growth and opportunity slip through its hands, when so many other sectors are struggling.”

The expected increase in headcount is a positive contrast to the broader job cuts faced by the tech industry in 2023 so far from global giants such as Meta, Google and Spotify. In February, Meechan said that layoffs were “always devastating”, but noted that these cuts were also “a rare opportunity for growing Scottish companies that are struggling to find skilled candidates as they release an experienced pool of talent back into the industry.”

According to ScotlandIS, the number of tech companies in Scotland having consolidated their growth has risen sharply. The proportion of businesses recording turnover over £1m has increased from 22 per cent in 2022 to 37 per cent in 2023.

The overall number of tech businesses expecting sales to remain flat or grow is broadly unchanged compared to last year (94 per cent in 2023 vs 95 per cent in 2022) and an improving picture compared to 2021 (88 per cent).  

Rapid sales growth (defined as 21 per cent or higher) is expected to decline as business models consolidate after a rush in post-pandemic demand. For example, in 2022 39 per cent of tech companies expected rapid sales growth, while this year that figure has reduced to 19 per cent. By contrast, the volume of companies expecting up to 20 per cent sales growth has increased this year from 44 per cent in 2022 to 57 per cent in 2023.

Meechan added: “A very positive outcome from this year’s survey is the way in which our tech sector has stabilised. Huge change was needed to cope with the ebbs and flows of the pandemic era, and that has now settled into more predictable and sustainable growth. Not only are more companies recording seven-figure turnovers, but more and more are also seeking to export their services outside of Scotland. The tech sector needs to export to grow so this is an encouraging sign for the future.”

Scotland’s tech companies report seeing the greatest opportunities for their business over the next 12 months in cybersecurity (46 per cent), followed by data analytics (45 per cent), and artificial intelligence (43 per cent).

While the top three opportunity areas have remained the same, their weighting has changed – cybersecurity has risen by over 15 per cent compared to last year, while artificial intelligence has increased marginally (one per cent) and data analytics has decreased marginally (one per cent) compared to last year. 

ScotlandIS’ annual Scottish Technology Industry Survey provides an in-depth insight into statistics from the past year.