Uncertainty slows growth for UK tech firms

Sources: KPMG, IHS Markit

Technology companies in the UK are still looking to grow in 2019 despite weak growth caused by global trade friction and Brexit uncertainty, according to accounting firm KPMG.

As the UK government battles with itself over how best to leave the EU on March 29, British technology businesses are seeing their weakest growth for three years says KPMG's quarterly survey of UK technology sector companies.

In the fourth quarter KPMG's UK Tech Monitor Index recorded a score of 52.4, a measurement of the strength of business activity across the sector. KPMG noted that this remained above the crucial 50.0 no-change value, which continued the upward trend signalled since the summer of 2012.

But the reading was down from 54.0 in the third quarter and pointed to the slowest rate of tech sector business expansion since the fourth quarter of 2015.

Technology companies also signalled the sharpest fall in backlogs of work for seven years, suggesting a lack of new work to replace completed projects at the end of 2018.

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

There were some positive indications in the report. Technology firms remain upbeat about their capital expenditure plans.

Research and development spending is robust and some companies are feeling a competitive boost from the weak pound helping new export sales.

Although, KPMG saw technology companies reducing the rate of new hires, almost half of all companies surveyed still expected to increase staff numbers. Technology companies' employment plans also outpaced the UK private sector as a whole, which has slumped to the lowest since the first quarter of 2013.

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