Comment: High growth re–think required

New research from three Scottish universities challenges that opinion. It not only questions the value of pumping funds into technology companies, it puts economic strategy firmly under the microscope together with the role played by agencies such as Scottish Enterprise.

Those behind this study – a potential turning point in business growth strategy – are not dismissing technology-based companies, nor the need to continue funding them. What they are warning against is an unrealistic expectation that they will naturally fall into the “high growth” category. Evidence, they say, suggests they do not create lots of jobs.

The research is therefore edging policy makers towards supporting more traditional companies, particularly consumer-facing businesses.

This really could turn perceived wisdom upside down. For years successive governments have pursued the technology dream, from electronics and the knowledge economy to the current developments in cloud computing and “li-fi”. It won’t stop, but those backing it should understand its limitations.

Technology-based firms tend to soak up a lot of capital and to clock up losses until their products are properly developed and marketed and a revenue stream is built.

This is not to say they make bad investments. Quite the contrary. Investors flock to technology businesses because the returns can be extraordinarily high, not because they create a lot of employment.

Governments have different priorities. If it’s jobs they want, then much better to back an establised firm with the opportunity to build its market.

Shareholding still the domain of the minority

The number of shares held by private individuals has halved since 1990, apparently because investors have been putting their money into other financial products.

This, apparently, has not been entirely through choice but more out of a passive attitude to investment whereby individuals have left their financial advisers to decide what they should do with their cash.

The privatisation frenzy of the 1980s did not create a shareholding democracy. Many of those so-called “Sids” – the name coined for those buying into the sale of British Gas – were not necessarily intending to stay in for long. Millions of members of the demutualised building societies were more or less handed shares whether they wanted them or not.

Large numbers of these reluctant shareholders offloaded their little nest eggs, in some cases for a quick profit, or simply because they had no interest in retaining them.

It is worth noting that between 1963 and 2010 the number of individuals owning shares in London Stock Exchange listed companies fell from 54 per cent to 11.5 per cent. Many of the earlier investors would have been old money, aristocratic and otherwise inherited.

Nowadays, those who have stayed in equities include DIY investors – day traders and those using online execution only brokers. It’s a reflection of a changed society and technological advances, but also an indication that equity investing for many remains the mysterious domain of other people.

Overseas Asos squeeze prompts online doubts

THE growth of online sales is providing those who invested early in internet retailers with some handsome profits and yesterday’s results from Asos will provide further encouragement. The shares have doubled in the past year.

However, there was a warning of a slowdown in some of its overseas markets, enough to spook the markets which marked the company down.

Internet shopping is the future, but these figures show that there will be wobbles along the way.