The UK technology sector is outstripping the country’s wider economy in a number of key areas, according to data from the latest KPMG-Markit report.
The Tech Monitor UK report noted that almost half of UK tech firms – 49 percent – expect to hire more workers over the next year. By contrast, only 11 percent of those companies surveyed anticipate a reduction in staffing levels. The KPMG-Markit study also revealed that hiring among UK tech companies was close to its strongest level for three years in Q1 2014. Tech sector employment during the first quarter of the year also grew faster than the UK private sector average according to Markit’s Purchasing Managers’ Index (PMI).
Q1 2014 also saw another steep rise in business activity in the sector, with growth recorded during the quarter only slightly slower than the 10 year high recorded in the fourth quarter of 2013. This marked rise in business activity in the first quarter of the year was supported by sharp rises in incoming new work and the lowest rate of cost inflation in the UK for over four years.
KPMG and Markit noted that the headline UK Tech PMI index, which measures business activity in 150 technology companies, recorded 60.0 in March, a figure considerably higher than the index’s key 50.0 no-change threshold and only marginally lower than the 10-year high of 60.9 recorded towards the end of 2013. The average score for the private sector as a whole in March was 58.1. This indicates that business activity growth in the technology sector easily outstripped that of the UK economy as a whole. According to Tim Moore, senior economist at Markit, the UK’s tech companies are currently punching above their weight in terms of contribution to the UK’s overall GDP growth. “The health of the tech sector and its ability to deliver productivity gains across the wider economy are key factors that will determine how quickly the UK economy can recover without hitting growth constraints,” said Moore.
According to the report, around 58 percent of UK tech companies expect their business activity to increase throughout 2014. By comparison, only 4 percent of companies expected a decline. Tudor Aw, head of technology at KPMG, said “The report points to a UK tech sector that is in rude health, and increasingly optimistic in its outlook on business activity and recruitment plans. Our data also shows the positive impact the sector has on the UK’s economic performance as a whole and the important role UK tech companies up and down the country play in the burgeoning recovery.”
The tech sector’s improving performance has also been strengthened by a number of other factors. Chief among these was the wider economic improvement seen across the UK. Although the tech sector outperformed the UK’s economy, the nation’s wider economic outlook did improve throughout the first quarter of the year. Increased investment spending and buoyant levels of client demand were also highlighted by the report as key factors in the strength of the tech industry’s resurgence. Respondents to the KPMG-Markit survey also indicated that the UK tech industry benefitted from higher selling prices, weakening cost inflation and a marked increase in new business volumes during the first quarter of 2014.
The nascent global economic recovery has also been beneficial to UK tech firms. According to the report, firms in the tech sector will be able to draw confidence from sustained improvements in a number of developed markets, particularly in Western Europe and the US. Improving economic conditions in developed markets are going some way towards offsetting the struggles of a number of emerging markets, where growth has declined considerably.
The strong performance of the UK’s tech sector was also noted by UK Trade and Investment (UKTI), a governmental department. According to data gathered by UKTI, the technology sector is quickly becoming not only one of the largest wealth creators in the UK, it is also one of the fastest growing business sectors of the last decade. Indeed, the tech sector is becoming extremely valuable to most developed nations, not just the UK. The G20’s internet economy is set to nearly double by 2016, reaching $4.2 trillion, up from $2.3 trillion in 2010. In the UK the internet economy is now worth an estimated £145bn, representing nearly 10 percent of overall UK GDP.
Speaking on the KPMG-Markit survey’s findings, Mr Aw said he believes the only thing stopping the UK tech sector from firmly establishing itself as a global tech centre is the lack of a headline public offering. “With the increase in IPO activity, I would like to see the strong performance of UK tech companies translate to a mainstream technology company floating in London to help boost the sector and cement the UK’s position on the map of global tech hotspots,” he said.
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