UK technology sector resilient despite falling optimism.
Introducing the first KPMG UK Tech Monitor Index. KPMG have teamed up with IHS Markit to bring you the latest in UK technology market updates.
We surveyed a panel of tech sector executives on a range of topics from changes in business activity, new work, backlogs, to employment, costs and charges and more. The UK Tech Monitor Index measures changes in business activity on average over the most recent quarter.
Report summary from Bernard Brown, Vice Chair at KPMG UK
“Our survey reveals that political uncertainty has dented client confidence contributing to a slowdown in growth at the end of last year. But, buoyant staff hiring and capital expenditure plans are still in place for 2019. This confidence is reflected in that almost 50% of UK tech firms intend to add jobs over the next year, whilst many traditional manufacturers are considering moving jobs offshore. This demonstrates the strength and resilience of the UK tech sector in the new digital economy.”
KPMG have teamed up with IHS Markit to bring you quarterly UK technology sector updates in the second KPMG UK Tech Monitor report. The index measures the strength of business activity across the sector.
The tech sector experienced a difficult end to 2018, as business activity growth eased to its weakest for three years and new work remained subdued. Global trade frictions and Brexit-related uncertainty were widely reported to have acted as a headwind to client spending.
Tech companies also signalled the sharpest fall in backlogs of work for seven years, suggesting a lack of new work to replace completed projects at the end of 2018.
UK tech companies have experienced a sustained rise in business activity since the summer of 2012. A supportive global economic backdrop, successful expansion into new overseas markets and resilient domestic consumer spending have driven growth over the past six years. However, latest survey data indicates the weakest upturn since Q4 2015. Tech firms cited subdued client confidence and ongoing political uncertainty as key factors holding back growth.
Looking ahead to 2019, there are positive signs in the latest report. While tech firms report that projections for demand growth have softened, they remain highly upbeat about their capital expenditure plans.
A strong record of R&D spending continues to drive confidence regarding new product launches, according to survey respondents. Some suggest that a competitive boost from the weak pound will help achieve new sales in export markets.
Tech sector employment plans are far stronger than that reported by the UK private sector as a whole, which are now the lowest since Q1 2013.
Download the full KPMG UK Tech Monitor report for more insights.