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KPMG UK Tech Monitor Q1, 2020, tech sector expansion grinds to a halt in final quarter of 2019

Q1 KPMG UK Tech Monitor

The latest edition of KPMG's UK Tech Monitor explores how UK tech companies performed during the fourth quarter of 2019. The headline UK Tech Monitor Index measures changes in business activity, new work, backlogs, employment, costs and charges.

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Bernard Brown

Partner and Vice-Chair

KPMG in the UK

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Also on home.kpmg

Key findings from the KPMG UK Tech Monitor Q1 report:

UK tech sector records weakest performance since Q2 2012

The headline KPMG UK Tech Monitor Index*, which measures the strength of business activity across the sector, revealed a sharp loss of momentum throughout the second half of last year. At 50.1 in Q4, down from 52.0 in Q3, the index was close to the neutral threshold and the lowest reading for seven-and-a-half years.

KPMG Tech Monitor

View the full graph.

Business outlook brightens amid hopes of Brexit clarity in 2020

Optimism regarding business activity in the next 12 months is the highest recorded by the survey since Q3 2018. At 71.4, the Business Activity Expectations Index was up from 67.0 in Q3 to post its highest reading since the same quarter in 2018. New technology opportunities, receding UK-China trade frictions and hopes of global supply chains rebounding were some of the main reasons behind this positive outlook.

Staffing levels at tech firms decline at the quickest rate for over a decade

At 47.7 in Q4 down from 49.9 in Q3 this shows that tech companies are shedding jobs at a potentially accelerating rate. A couple of key factors were cited as having an influence on this including political uncertainty and difficulties finding suitably skilled staff.

Input cost inflation eases to a three-and-a-half year low

Operating costs continue to rise but the overall rate of cost inflation reached its weakest level since Q2 2016 at 51.4, down from 52.7 in Q3.

Tech sector outlook – confidence builds regarding future hiring, profits and capital expenditure plans

Now that Brexit has begun in earnest tech firms believe that we will see greater investment over the coming months in areas such as new product developments and plans to expand sales and marketing divisions which will also spark an improvement in hiring intentions with the rising business requirements.

Download the full KPMG UK Tech Monitor Report for more insights.

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