UK tech companies report that new business volumes rose at the slowest rate since mid-2013 due to uncertainty and delays with clients’ decision making ahead of the general election, according to the latest KPMG/Markit Tech Monitor UK survey.
At the end of the first quarter of 2015, the tech sector UK Business Activity Index was at 55.7, which dropped from 59.6 in Q4 2014 to its second-lowest since mid-2013. The latest figure was also well below the survey-record high seen in Q1 2014 (60.5).
The report, which tracks the performance, confidence and employment outlook of UK technology businesses, illustrated a rosier picture for tech sector hiring plans with over two-fifths of the survey panel anticipating an increase in hiring over the year. It also found that tech sector employment has expanded by almost one-quarter since 2010, which is around three times the pace of the overall UK jobs market. We estimate that the UK tech sector now directly accounts for at least one million jobs.
Commenting on the report, Tudor Aw, partner and head of technology sector at KPMG, said: “This quarter’s Tech Monitor results continue the theme of a robust and thriving UK tech sector that outstrips the wider UK economy. Importantly, the sustained rise in tech business activity that we have seen in recent years has translated to reinvestment in capital expenditure and job hiring, again at a rate that has been much higher than other UK sectors. These results confirm the importance of the tech sector in helping drive growth and employment in the UK.
“Tech Sector employment shows the significance of the sector in the 21st century where technology is all pervasive. The UK tech sector has grown significantly, delivering three times the rate of job creation as the wider UK economy and now accounts for over 1 million jobs.”
The Tech Monitor UK survey respondents remained positive about growth over the coming year. Almost eight times as many UK tech companies (55 per cent) anticipate a rise business activity in over the next 12 months as those that forecast a fall (7 per cent). However, there is evidence that renewed risk aversion within domestic and external markets has held back near-term growth momentum. It found that tech firms have been much more able to look through the short-term volatility, with long-term expansion plans and positive capex feeding through to the fastest increase in UK tech sector staff hiring since the survey began in 2003.
Adding to the resilient UK tech sector picture, positivity persisted in terms of capex plans at the start of 2015, with around twice as many of the survey panel (29 per cent) forecasting a rise as those expecting a fall (14 per cent).
“It is an important message to political parties of all persuasion in the upcoming general election that the sector is worthy of support and focus, particularly when it comes to promoting the sector and investing in STEM based education that is so vital to meeting the demands of tomorrow’s tech businesses,” concluded Tudor Aw.
Notes to Editors:
UK Tech Sector Purchasing Managers’ Index® (PMI®) survey data
UK tech sector PMI data is derived from a representative subcategory of approximately 150 tech companies within 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.
The intellectual property rights to the UK Tech Sector Purchasing Managers’ Index® (PMI®) data provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index® and PMI® are either registered trade marks of Markit Economics Limited or licensed to Markit Economics Limited. Markit is a registered trade mark of Markit Group Limited.
Nahidur Rahman, KPMG Press Office
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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.