The data shows a total of 1,663 new tech companies were incorporated in Scotland in 2024, up from 1,553 the previous year. Most UK regions saw a year-on-year decline, except for Scotland, the North East and Northern Ireland. London, which accounts for the highest number of tech incorporations, saw its first annual decline in five years, down 6% from 26,060 in 2023 to 24,455 in 2024.

Hannah Atchison, associate director, RSM in Edinburgh, said: “It’s fantastic to see Scotland’s growth compared to other UK regions. Scotland, in particular, shines in the gaming industry. Nationally, video games rank among the top five subsectors for incorporation growth, which likely contributes to Scotland’s success. Additionally, Edinburgh’s robust fintech sector, rooted in its long-established financial services, is also a significant factor.

“The challenge for start-ups in Scotland remains their ability to scale. There is a lack of later stage capital which hampers faster growth. The common practice of drip-feeding small amounts of capital hinders long-term planning and rapid growth. Additionally, the relative size of the ecosystem makes attracting and retaining talent difficult.”

Commenting on the UK-wide picture, Ben Bilsland, partner and head of technology industry at RSM UK, commented: “The fall in UK tech incorporations in 2024 points to lower business confidence and a slowing tech sector which will come as more tough news for the Chancellor. With weak economic growth, high interest rates and high inflation, and businesses set to bear the brunt of the Chancellor’s tax rises, confidence among tech businesses is diminishing.

“Uncertainty in the US, particularly surrounding new policies and potential tariffs, is also partly to blame for caution in UK tech boardrooms as they take a ‘wait and see’ approach. Ultimately, the growing costs associated with starting a business, finding talented people, and scaling it, is viewed as too risky for some entrepreneurs. Despite recent positive noises from the government around investing in AI, tech businesses still have to wait until the spring to see the full details, and the impact is not expected to be immediate. A forward-looking and positive stance on AI is welcomed, as it represents a huge growth opportunity for the sector.

“Many tech businesses feel they’ve been overlooked as the Autumn Budget did not include much in the way of fresh policies and funding to directly stimulate the sector. It is crucial for the UK that the government delivers a plan to ensure that founders on the cusp of tech evolution have enough incentive to launch their idea in the UK, rather than taking it overseas. This may be in the form of generous tax breaks, direct funding or further plans around enterprise zones. Without some form of urgent action, this downward trend in tech incorporations will continue, and the UK will fall behind on the global stage.”