Bernard Brown, Vice Chair, at KPMG in the UK comments on Tech Monitor as below,
“The tech sector was not alone in reporting a severe impact on business activity from the COVID-19 pandemic in the first quarter of 2020, as the public health crisis has inevitably resulted in cutbacks to spending, investment and hiring across the UK economy.
Technology companies registered the sharpest drop in business activity since the height of the global financial crisis over a decade ago, with survey respondents citing weaker demand as clients looked to delay investment decisions until the outlook brightens. Many tech firms anticipate a bounce in demand once measures to slow the spread of the virus can be lifted, but the uncertain duration weighed heavily on optimism about growth prospects in 2020.
Confidence at tech firms remains stronger than most sectors of the UK economy, however, helped by pockets of growth within software & services and expectations of resilient consumer demand. The latest survey showed UK tech companies adding to their payrolls at the start of 2020, which is a beacon of light in the gloom and stands in contrast to job cuts across vast swathes of the service sector.
It is clear there are still many opportunities for tech companies to innovate and grow, with the provision of critical technology infrastructure and support for businesses continuity among the channels through which the sector is helping the UK economy in these difficult times.”
The UK’s tech sector suffered its worst performance since the global financial crisis in the opening quarter of 2020, the latest KPMG UK Tech Monitor Report reveals, as the COVID-19 pandemic led to a swift decline in non-essential spending and escalating uncertainty about the economic outlook.
Business activity across the tech sector declined for the first time in almost eight years, according to the latest KPMG UK Tech Monitor Index.
At 47.1 in Q1 2020, down from 50.1 in Q4, the headline index was well below the crucial 50.0 no-change mark and the latest reading signalled the fastest decline in business activity since Q2 2009.
Survey respondents overwhelmingly attributed the downturn in business activity to the impact of the COVID-19 pandemic at the end of the first quarter.
In particular, tech firms noted that the public health emergency led to a rapid fall in non-essential corporate spending, cancelled projects and widespread closures among clients.
Despite the marked fall in overall business activity, some areas of the tech sector continued to report growth during Q1 2020. These companies often commented on rising demand for services related to home working and business continuity.
Looking at the single-month of March, the software services sub-category bucked the overall tech sector trend by registering a slight upturn in business activity (index at 50.8).
In contrast, equivalent data compiled by IHS market in March signalled the fastest drop in UK private sector output for more than 20 years (index at 36.0).
While there were the pockets of growth in technology services, latest data from the Tech monitor index revealed a broad-based slump in production of technology goods during the first quarter.
The downturn in this sub-category partly reflected a severe shock for international supply chains amid plant closures in Asia related to the COVID-19 pandemic.
UK manufacturers of technology goods widely noted difficulties fulfilling orders following shortages of electronics components and delayed shipments of critical inputs from suppliers.
A recovery in staff hiring was the most positive development highlighted by tech firms so far in 2020. Employment numbers picked up in each month of the first quarter, with the overall pace of jobs growth reaching its strongest since Q2 2019.
Higher staffing numbers were mostly attributed to an immediate need to fill vacancies and deliver existing projects.
Tech companies also remain much more upbeat about the business outlook than other areas of the UK economy, according to the latest survey data.
However, weaker order books and escalating concerns about the impact of the COVID-19 pandemic on client spending have hit growth projections across the tech sector. As a result, business confidence fell sharply from its peak in Q4 2019.