The fourth edition of KPMG's UK Tech Monitor explores how UK tech companies performed during the third quarter of 2019. The headline UK Tech Monitor Index measures changes in business activity, new work, backlogs, employment, costs and charges.
The UK technology sector experienced another slowdown in business activity growth during the third quarter of 2019, the latest KPMG UK Tech Monitor report reveals.
The headline KPMG UK Tech Monitor Index*, which measures the strength of business activity across the sector, registered 51.9 in the third quarter of 2019. Although it remained higher than the crucial 50.0 value, which separates expansion from contraction, this signalled the slowest rate of the UK tech industry growth since Q4 2015.
Latest data in the report also revealed a drop in new orders received by UK tech sector companies for the first time in just over seven years. The New Business Index slipped from 52.0 in Q2 to 46.6 in Q3, which was below the neutral 50.0 level. The rate of decline was the steepest since the second quarter in 2012, with tech firms in the survey reporting particularly subdued demand from overseas clients.
Unsurprisingly, reduced capacity pressure and concerns about the near-term business outlook contributed to more cautious staff hiring policies in Q3. The latest survey pointed to unchanged employment across the tech sector, which ended a ten-year period of workforce expansion. This was shown by the Employment Index posting at the neutral value of 50.0, which was down from 52.6 in Q2.
Although tech companies are finding growth more difficult to achieve due to uncertainty in the economy, their performance remains stronger than elsewhere in the UK private sector. The sector is actually on course to achieve its largest outperformance against the rest of the UK economy.
In a similar way, tech companies remained optimistic towards business activity over the year ahead - at 67.0, the Business Activity Expectations Index edged up from 66.0 in Q2. This was linked to new marketing strategies, investment in new product lines and expansion into overseas markets.
Download the full KPMG UK Tech Monitor report for more insights.
*The index measures the strength of business activity across the sector. A reading above 50 shows an increase in overall business activity across the sector, whereas a reading below indicates a decline.