The UK tech sector enjoyed a quarter of robust growth from April to June 2014 with the expansion of business activity rising at its fastest pace since the onset of the financial crisis in 2007, says the latest KPMG/Markit Tech Monitor.
The UK survey also indicates that improving UK economic conditions have ushered in a sustained period of strong top line growth for tech companies, which in turn boosted investment spending plans across the sector. Almost two-thirds (61%) report a solid upturn in year-ahead expectations for business activity and more than 4 in 10 (43%) also declare an intention to hire more staff.
It is also clear from the study that capital expenditure plans within the tech sector are at their most upbeat since data was first collated in 2009. Today, 43% anticipate an increase – compared to the previous high of 37.5%.
Commenting on the latest Tech Monitor UK results, Tudor Aw, Head of Technology at KPMG, says: “The UK tech sector is firing on all cylinders with sustained growth outstripping the wider economy. Importantly, this good news story looks like it will continue in the year ahead with many tech companies planning to loosen the purse strings to hire staff and raise capital expenditure. For the first time since 2007, there is also a welcome upturn in Tech IPOs which hopefully signals the beginning of a comeback of Tech companies to the London Stock Exchange, something that will be important in convincing tech start-ups that the UK is the right place to be.”
Other key findings for Q2 2014 include:
• around ten times as many tech companies (61%) expect a rise in business activity over the year ahead compared to those forecasting a fall (6%);
• capital expenditure intentions reach the highest point since this series began in 2009, with 43% of tech firms forecasting a rise and only 8% a decline.
Looking at employment prospects in more detail, the latest Tech Monitor UK data signals further expansion of tech employment in the second quarter of 2014, with a ‘score’ of 52.2 on the Index (anything above 50 signifies growth). However, it fell from 55.7 in Q1, suggesting that the pace of job creation has slowed from the steep rates seen throughout much of the past four years.
Tech sector profitability also continued to increase in the second quarter of 2014 (with an Index ‘score’ of 54.7 in Q2). Survey respondents suggested that the latest improvement in profitability was supported by greater new work intakes, higher average selling prices and relatively subdued input cost inflation.
Looking ahead, tech companies seem to have a positive outlook about business prospects for the coming year (+54.7 percent net balance). Their sentiment is also stronger than the average recorded across all UK industry sectors (+51.7 percent net balance). Tech firms also report strong hiring intentions for the upcoming 12 months, despite the slow-down recorded during Q2. Latest data signals that 43.1% of UK tech companies plan to expand their payroll numbers, while just 5.9% expect to shed staff.