SLOWDOWN: Tech sector’s overall growth slows down

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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 second quarter of 2015 showed yet another quarter of solid growth but the overall momentum weakened from peaks seen in 2014.

Graham Pearce

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, Graham Pearce, director and head of technology sector at KPMG Enterprise in the North, 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 expect an increase over the year ahead and only six per cent forecast a decline. As for job creation, almost half of the respondents anticipate a rise in payroll numbers over the year ahead, indicating the strongest employment projections across the UK tech sector since 2009.