Yahoo Finance Brexit gloom hits UK tech sector as optimism sinks to 10-year low
Optimism in the UK tech sector has plummeted to a 10-year low, despite business activity growth recovering to its highest level in almost a year.
Tech firms reported that Brexit-related uncertainty and a subdued global economy had the potential to dampen corporate spending, alongside fears of a skills shortage for the sector threatening growth.
The latest UK Tech Monitor Index by auditing giant KPMG shows business activity rebounded despite the gloom to a score of 54.4 in the first quarter, with readings above 50 showing increased trading in the sector.
It marked a sharp improvement on the previous quarter’s 52.3 reading, and was well above the overall UK economy’s sluggish 50.6 reading – a six-year low.
Firms in the sector, which includes technology software and services providers as well as technology equipment manufacturers, attributed faster sales growth to resilient demand from the US and from diversification into new overseas markets.
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But the positive growth and overseas activity does not appear to be enough to lift confidence in the sector.
KPMG found businesses have become less optimistic about the next 12 months. Its index of business sentiment dropped from a positive reading of 69.8 at the end of 2018 to 65.6 at the start of 2019.
While the rate of employment growth remained among the weakest since 2013 in the first quarter of the year, 43% of tech firms said they expected to boost their workforces in the next 12 months, while only 11% forecasted 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.
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“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 [quarter one],” he said.
“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,” Brown added.
“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.”
