Science: Overseas profits made in the UK: In the first of a major series, Lynne Curry looks at how the UK's booming software industry is losing out to takeovers and talent poachers

Laurence Holt's long, low TVR sports car, hand-built in Blackpool, stands on the bricked forecourt outside his Hammersmith office, an architect-designed mews-type development with views over Ravenscourt Park, protected by an electronic gate.

Holt, 29, is dressed from head to foot in black, the same colour as the narrow-finned blinds in his office; most of the other staff favour Levi's jeans. There are 28 of them, and simple maths on the company's income reveals that each is expected to earn an average of pounds 50,000 in fees this year.

Holt's company is Quidnunc, consultants in information technology (IT) and suppliers of bespoke software. He founded the business in 1987 in a room of a Bloomsbury flat and now this southernised Mancunian is one of the sharp young things of British software.

Rich and successful, he reflects his industry - hi-tech, high fees and high salaries. In offices predominantly scattered around the motorway suburbs of the South-east, millions of pounds are being generated. Yet there are disappointments in this industry: so much British talent and innovation has ended up delivering its profits abroad.

Barely 30 years old, the British software scene has had a quiet, virtually invisible growth in the public perception. Plain modern buildings, with names that puzzle the common man - not least because of the industry's marked fondness for initials and acronyms - could never be as evident as the working pits, manufacturing plants and factories that constituted the last generation of workplaces.

Yet in 1992, bespoke software earned pounds 560m for Britain. Although 'off the shelf' software products brought in pounds 1.7bn, the bespoke sector is significant and growing. Turnkey solutions, which are fixed-priced contracts between hardware manufacturers and software suppliers, earned another pounds 778m, and systems integration brought in pounds 675m.

In total, the UK software and computing services market, which encompasses everything from tailored design to IT consultancy and outsourcing, was worth pounds 6.1bn and by 1996 is predicted to grow to pounds 9bn. Software products are expected to grow by 12.3 per cent a year between now and then.

Behind the flat fascias of these office blocks, which are more white T-shirt than white-collar, British brains in techno-towns such as Slough, Reading, Harlow and Stevenage work on products which can net their employers thousands of pounds per employee. In 1992, Macro 4 headed the league of profits before tax, when each employee earned it more than pounds 44,000. Micro Focus, a Newbury company with 160 employees, was in second place: each of its employees brought in pounds 38,400 before tax. Average staff costs in 1992 were pounds 25,600 per employee and the average salary of the highest paid director was pounds 76,200.

But while the UK is widely respected for its intellectual capability, it seems adept at letting its profits go abroad. When small, successful companies have grown big they have frequently been taken over. Some of the most prominent British managers are doing good jobs - but in other countries.

In world terms, Britain is well down the league, representing about 8 per cent of the global computing services market. A British company makes its first appearance in the world ranks at number 29, and Germany and France are ahead of Britain in the European league. Since 1985, when two-thirds of the top 10 suppliers to the UK computing services market were owned in the UK, ownership has switched dramatically. Only 23 per cent of these companies remained UK- owned in 1992, with the US owning 42 per cent, France 17 per cent and Japan 18 per cent.

The transfer of ownership has evoked dismay among industry commentators. Richard Holway, publisher of the annual Holway Report, said the shift lent new meaning to the frequently used term 'restructuring': 'When applied to the UK computing services industry in the last six years, the word could take on the same meaning as in the sentence 'My car has been restructured by a foreign juggernaut'.'

Neither has the industry provided the panacea in terms of jobs which was hoped for. In the Holway database of more than 1,000 companies, employee numbers fell by 9,000 between 1990 and 1992 to 110,000. The only conclusion that can be drawn is that the growing incomes and profits are being earned by, and distributed among, fewer beneficiaries, many of whom are abroad. The UK can, however, lay claim to a bustling community of small companies that are making healthy livings from software. The Computing Services Association, which represents more than 360 organisations, shows staff numbers at some firms as low as five. High-flyers are more likely to number their staff in hundreds (only a handful in thousands), while the companies with the biggest payrolls are UK subsidiaries of American firms.

Banking and finance are the biggest consumers of software, swallowing more than a quarter of the money spent in the UK. Systems evolved here for everything from pensions funds to dealing house systems go all over the world. The British companies BIS, creator of the Midas banking system, and ACT are among the prominent ones.

Increasing private involvement in local and central government is expected to accelerate spending on software over the next two years, pushing it to pounds 2.2bn. Public utilities and retail and distribution are predicted to grow by more than 9 per cent. More than pounds 1bn is currently spent in both sectors.

Next week: The financial sector, expected to be worth pounds 3bn by 1996.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
video
Arts and Entertainment
tv

First full-length look is finally here

Arts and Entertainment
Stanley Tucci as DCI Eugene Morton, Sophie Grabol as Hildur Odegard and Christopher Eccleston as Professor Charlie Stoddart in 'Fortitude'
tvGrace Dent: Still, it's compelling and cinematically sublime
News
news

Rap music mogul accused of running two men over in his truck

Arts and Entertainment
EastEnders actor Danny Dyer has been rejected from Game of Thrones three times
tv
Arts and Entertainment
Frank Turner performing at 93 Feet East
musicReview: 93 Feet East, London
News
Toronto tops the charts across a range of indexes
news

World cities ranked in terms of safety, food security and 'liveability'

ebooks
ebooksA special investigation by Andy McSmith
Voices
A mother and her child
voices
Voices
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
News
Tax now accounts for ‘nearly 80%’ of the price of a bottle of whisky
news

Arts and Entertainment
Peppa Pig wearing her golden boots
film

"Oink! Oink! Hee hee hee!" First interview with the big-screen star

Life and Style
tech

Biohacking group hopes technology will lead people to think about even more dystopian uses

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Continuous Improvement Manager

£41500 per annum: Recruitment Genius: This company is going through a period o...

Recruitment Genius: Data Entry Administrator

£10670 - £16640 per annum: Recruitment Genius: This fast growing reinforcing s...

Recruitment Genius: Regional Gas Installation Manager - South East England

£36000 per annum: Recruitment Genius: A Regional Gas Installation Manager is r...

Recruitment Genius: Domestic Gas Service and Breakdown Engineer - South East

£29000 - £31000 per annum: Recruitment Genius: A Domestic Gas Service and Brea...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee