Yahoo Finance Tech sector growth weakest for three years as Brexit uncertainty bites
The UK tech sector ended 2018 on a low note as business activity growth dropped to its weakest in three years and new work remained subdued, according to a report released on Monday.
‘Big Four’ auditing firm KPMG, working with global information provider IHS Markit, has released it quarterly UK Tech Monitor Index (TMI) report, which measures the strength of business activity across the sector. It found a significant decrease in growth at the end of last year.
At 52.4 index points in the last quarter of 2018, the sector remained above the crucial no-change value of 50, continuing the upward trend signalled since the summer of 2012.
But the reading was down from 54 in the previous quarter, and points to the slowest rate of tech sector business expansion since the end of 2015, the KMPG study found.
Tech companies also experienced the sharpest fall in backlogs of work for seven years, which KMPG said suggests a lack of new work to replace completed projects at the end of 2018.
Political uncertainty and global trade frictions have dented client confidence, but extra staff hiring and capital spending plans will go ahead, according to the report.
Bernard Brown, vice chair of KPMG, said: “Our survey reveals political uncertainty has dented client confidence, contributing to a slowdown in growth at the end of last year. But buoyant staff hiring and capital expenditure plans are still in place for 2019.
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“This confidence is reflected in the statistic that almost 50% of UK tech firms intend to add jobs over the next year, while many traditional manufacturers are considering moving jobs offshore. This demonstrates the strength and resilience of the UK tech sector in the new digital economy.”
It’s not all doom and gloom, however, as there are som positive signs for 2019. While tech firms said projections for demand growth have softened, the remain highly upbeat about their capital expenditure plans.
A strong record of research and development (R&D) spending continues to drive confidence regarding new product launches, some survey respondents said. Others suggested a competitive boost from the weak pound will help achieve new export sales.
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Some tech companies responded to subdued business investment across the wider economy by putting the brakes on staff hiring at the end of last year. While employment numbers continued to rise overall in the last quarter of 2018, the rate of growth continued to soften from a survey-record high seen at the start of the year.
However, tech industry is expected to be a strong engine of job creation in 2019. Almost half of the survey panel said they plan to boost workforce numbers, while less than one in ten forecast a shortfall.
The tech sector employment plans are far stronger than that reported by the UK private sector as a whole, which are now the lowest since the beginning of 2013, KMPG found.
