The UK tech sector in the second quarter of 2015 signalled an overall slowdown in growth due to the impact of the General Election and euro area uncertainties, but at the same time, staff hiring intentions jumped to a survey-record high and tech companies signalled greater confidence about future workloads, according to the latest KPMG/Markit Tech Monitor UK survey.
The report, which tracks the performance, confidence and employment outlook of UK technology businesses, illustrated that the second quarter of the year marked three years of sustained business activity growth across the UK tech sector, but the pace of expansion was the weakest since Q1 2013. The survey respondents suggested that uncertainty at home and abroad had weighed on sales volumes and new business wins in Q2 with business spending decisions delayed ahead of the UK General Election, while some firms also noted that the euro crisis had acted as a drag on confidence.
The slowdown in business activity didn’t resonate with profitability in the sector. In Q2 2015, the tech sector experienced growth in profits, with the index posted at 54.3, up from 52.6 in Q1, to register the strongest rate of improvement since the end of 2014.
Commenting on the report, Tudor Aw, partner and head of technology sector at KPMG, said: “The latest Tech Monitor report can be summarised effectively as a ‘game of two halves’. The second quarter of 2015 showed yet another quarter of solid growth but the overall momentum weakened from peaks seen in 2014. This reflected the impact of a number of uncertainties, most notably the General Election and euro area uncertainties.
Looking ahead, tech companies are highly upbeat projections for activity, job creation and capex during the next 12 months. In terms of business activity, just over half (57%) expect an increase over the year ahead and only 6% forecast a decline. As for job creation, almost half of the respondents (49%) anticipate a rise in payroll numbers over the year ahead, indicating the strongest employment projections across the UK tech sector since this index began in October 2009.
Around 33% of the survey panel expect a rise in capex over the next 12 months and only 7% anticipate a reduction (an improvement from 29% and 14% respectively in Q1). Meanwhile, the vast majority of the survey panel (73%) forecast an upturn in profits during the year ahead, against just 2% that foresee a decline.
“Happily, it looks like Tech companies were just pressing the pause button as our survey also shows that despite this Q2 slowdown, tech companies are very upbeat about the future, forecasting an upturn in profitability, strong job hiring intentions and continued investment in capex. This is consistent with what I am hearing from Tech companies, that business activity is coming back strongly post-election uncertainties and that there are tailwinds from benign economic conditions, increasing maturity of cloud solutions and customer needs to address their IT infrastructure as growth picks up,” concluded Aw.
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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 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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