The KPMG UK Tech Monitor Index, the weakest pace of growth registered in past three years.
The sector - which includes technology software and services providers, and technology equipment manufacturers - also outperformed the overall UK economy in Q1 2019, which grew at the weakest pace (50.6) for over six years.
Tech firms attributed faster sales growth to resilient demand from the US and from diversification into new overseas markets. The new business index registered at 55.1 in Q1, up from 51.9 in the final quarter of last year.
Despite improved growth in the sector, businesses had become less optimistic for the next 12 months, with the index measuring sentiment dropping from 69.8 in Q4 last year to 65.6. Firms reported that Brexit-related uncertainty and a subdued global economy had the potential to dampen corporate spending, alongside concerns on the tech sector skills shortage threatening growth.
While the rate of employment growth remained among the weakest since 2013 in Q1, 43% of tech firms said they expected to boost their workforces in the next 12 months, while only 11% forecast a reduction.
Bernard Brown, vice chair at KPMG UK said:
“The latest Index ultimately outlines the resilience of the UK tech sector, and the strength of its ability to compete globally.
“It’s encouraging to see tech firms’ output and order books rebound from the low levels of growth seen at the end of 2018, as corporate demand for technology services and a healthy pipeline of new product launches supported sector growth in Q1.
“While business may be concerned about global economic headwinds threatening customer spending, confidence is being buoyed by long term trends where we have a track-record for innovation.
“Advances in AI-enabled enterprise software, innovation in fintech and a strong demand for cloud technologies are all excellent opportunities for the sector to grow in the year ahead.”
Sources: KPMG, IHS Markit
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Notes to editors
UK Tech Sector Purchasing Managers Index® (PMI®) data
UK Tech Monitor Index data is derived from a representative sub-category of approximately 150 tech companies within IHS Markit’s regular PMI® surveys of UK manufacturers and service providers. Tech is defined in this report as technology software, technology services and manufacturing of technology equipment. All figures are seasonally adjusted and smoothed using a three-month moving average, to better highlight underlying trends in the data.
UK Tech Sector Business Outlook data
Business activity expectations data are drawn from the monthly PMI® surveys question on companies’ expectations for their activity/output over the next 12 months. Prior to July 2012, only service sector companies were asked this question. Employment, capex, profits and input cost expectations data are based on responses from UK services and manufacturing firms participating in IHS Markit’s tri-annual Global Business Outlook survey, which is based on the same panel of companies as the PMI® surveys.
Technology sector industry groups
Software publishing (SIC 582), Computer programming, consultancy and related activities (SIC 620), Data processing, hosting and related activities; web portals (SIC 631), manufacture of computer, electronic and optical products (SIC 26), manufacture of electrical equipment (SIC 27).
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