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Posted on January 21, 2019 by staff

Political uncertainty causes weakest tech sector in three years

A new report suggests that the tech sector has been hit by political uncertainty and global trade frictions.

The quarterly survey of UK technology sector companies was conducted by professional service company KPMG.

The uncertainty has led to dented client confidence, but buoyant staff hiring and capital spending plans are still in place for 2019, the report states.

“Our survey reveals that political uncertainty has dented client confidence contributing to a slowdown in growth at the end of last year,” said Warren Middleton, Partner and Head of Consulting, National Markets, at KPMG UK.

“But, buoyant staff hiring and capital expenditure plans are still in place for 2019.

“This confidence is reflected in the statistic that almost 50% of UK tech firms intend to add jobs over the next year, whilst many traditional manufacturers are considering moving jobs offshore. This demonstrates the strength and resilience of the UK tech sector in the new digital economy.”

While employment numbers continued to rise overall in Q4, the rate of growth continued to soften from a survey-record high seen at the start of 2018.

Operating expenses continued to rise sharply at tech firms, albeit at a weaker pace than the record highs seen in 2017. Difficulties filling vacancies pushed up staff costs, while exchange rate depreciation fuelled input cost pressures for dollar denominated purchases.

Looking ahead to 2019, KPMG believes that there are positive signs in the latest report. While tech firms report that projections for demand growth have softened, they remain highly upbeat about their capital expenditure plans.

A strong record of R&D spending continues to drive confidence regarding new product launches, according to survey respondents, with some telling KPMG that that a competitive boost from the weak pound will help achieve new export sales.