Creative Industries: Software: Help for the hothouse

Size of UK software industry: pounds 7.8bn

UK employment: 240,000

Annual growth rate: 11 per cent

BRITAIN may not have produced a Bill Gates, but globally it is seen as a hothouse of creative software talent: so much so that the software king has invested millions of pounds in research and development facilities for Microsoft in Cambridge.

There are around 50,000 software development businesses in Britain employing a total of 240,000 people. The companies are mainly small: half have annual revenues of less than pounds 50,000 and only 1,600 post profits of more than pounds 1m a year.

Most of these companies are manned by highly creative people - manned being the right word as the industry is heavily male-dominated. But they often lack the management and commercial skills to make their businesses profitable. The Department of Trade and Industry is trying to address this problem with an information campaign and by setting up the Software Business Network.

That, however, is far short of the tax breaks the Government is considering offering to start-up biotechnology firms, for example. Partly due to UK laws, the number of contract staff working in the industry is higher than in the rest of Europe. Another reason for the high number of casual workers is the shift to outsourcing and subcontracting.

Far from being at the mercy of whoever will employ them, however, many of these workers command high fees due to a major shortage of skilled software workers. Poaching of highly trained staff is rife, which can be a disincentive for training invest-ment.

Two major changes are exacerbating the lack of skilled staff. Firstly, the single currency due to be introduced in most of the European Union next year requires major changes in the computer systems of banks and business in general. In addition, demand is high for software professionals to solve computer "millennium bug". The core industry is, in any case, expanding rapidly.

The information technology sector suffered a serious slump in Britain during the recession in the early 1990s, but since then it has returned to the double digit growth of the 1980s. In 1996, the UK market for computing services was worth pounds 12.7bn, up 13 per cent on the year before, of which the software sector took about 62 per cent. If the negative and minimal growth areas of operating software and hardware maintenance are excluded, the growth rate was 16.7 per cent.

Yet, given the future importance of the industry, the UK market for computing and software services still only represents about 1 per cent of GDP.

The Millennium Experience in London should boost the software industry as the project plans to highlight the IT sector. But much more needs to be done, especially among schoolchildren, to promote knowledge and awareness of computers so that IT training becomes a core part of the school curriculum, right up there alongside the three Rs.