Most medium-sized West technology companies have no plans to invest in new overseas markets over the next year, despite major opportunities in the so-called BRIC (Brazil, Russia, India and China) economies.
New research from accountants and business advisers Grant Thornton shows domestic investment continues to be the number one priority for ICT businesses with many considering entering fast-growing foreign markets as too difficult or risky.
Across the UK a total of 141 deals were completed last year, a higher volume than with any other market.
In terms of outbound investment, countries such as the US, Australia and Germany remain at the top of the league in comparison to other markets. However, three-quarters of tech firms based in the West do not plan to enter new overseas markets.
Grant Thornton’s South West head of corporate finance Mark Naughton said: “Over the past five years the volatility of the global market has inevitably had an impact on the volume of cross-border deals.
“Traditional, mature markets such as those in the G7 remain attractive to UK firms because of a familiar business environment and language, and greater access to highly skilled employees. In contrast, outbound investment into fast-growing, tech-friendly economies such as India, China and Brazil is still relatively low.”
To help highlight the opportunities available, Grant Thornton has produced a Technology Expansion Index, which compares existing investment markets such as the UK, the US, Germany, France and the Netherlands with emerging economies. The data demonstrates that the markets with the biggest opportunities are also the markets that present the biggest challenge for investors.
“The sheer volume of information that a business has to get to grips with before making an investment into an unfamiliar market can be daunting,” said Mark.
“There are three key stages that are vital foundations for a market entry strategy: full assessment of the opportunity available, thorough preparation so that a business is ready for execution, and management of the actual execution itself.”
Paul Short, Grant Thornton associate director in corporate finance, added: “One of the reasons that UK technology businesses are reluctant to enter China, in particular, is a fear of copying or reverse-engineering of their products.
“While this is still a risk, as China’s patent system evolves there are increasing opportunities for businesses to protect their intellectual property (IP) and these opportunities are being noticed.
“Recent research by the China-Britain Business Council showed that 59% of UK businesses with a presence in China want to increase their R&D activity there.”