UK tech sector companies are in a buoyant mood in regards to future job hiring and business activity, with employment trends in the tech sector outstripping those seen across the UK private sector as a whole, according to the latest KPMG/Markit Tech Monitor UK Report.
Meanwhile, the PMI Employment Index shows that current job hiring by UK tech companies is close to its strongest for three years, and faster than the UK private sector average.
Tech sector business activity growth in the first quarter of 2014 was only marginally slower than the ten-year high reached at the end of 2013, supported by steep rises in incoming new work and the lowest rate of cost inflation for over four years. The headline UK Tech PMI index measuring UK tech sector business activity posted 60.0 in March, well above the crucial 50.0 no-change threshold and close to the 10-year high of 60.9 recorded at the end of 2013, indicating business activity growth in the tech sector outstripped that of the UK economy as a whole (Markit’s UK Composite PMI was 58.1 on average in Q1 2014).
Commenting on the latest Tech Monitor UK results, Tudor Aw, Head of Technology at KPMG, said: “Recent falls in share prices of technology stocks have led some to question the health of the tech sector but all the data in this report point 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. It is time the sector received the recognition and support it deserves. There are some fantastic advocates in government and business for the UK’s buzzing start-up scene butwe must not neglect the wider tech sector. We should ensure that the sector as a whole gets the profile and support that it needs such as focused government policies that help develop and encourage education in STEM subjects, and ease access to tech talent on a global basis.
“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.”
An improved domestic economic outlook, increased investment spending and buoyant client demand were all key factors behind the latest rise in tech sector business activity, according to survey respondents. Latest survey data show that tech sector firms also benefited from a combination of higher selling prices, weakening cost inflation and rising new business volumes during the first quarter of 2014. The index measuring average input costs faced by tech sector firms posted 53.9 at the end of Q1, down from 56.2 at the end of 2013 and consistent with the slowest rate of input cost inflation since late-2009.
Tim Moore, Senior Economist at Markit, added: “UK tech companies clearly punch above their weight in terms of contribution to UK GDP growth. The latest survey results will be reassuring to policymakers given the importance of the sector to the sustainability of the economic recovery. 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.
“Strong figures from the tech sector add to a recent flurry of positive news on the UK economy, which has prompted substantial upward revisions to the 2014 growth outlook from institutions such as the IMF and Office for Budget Responsibility.
“Tech companies stand to benefit from two key domestic economic tailwinds this year, which are rising business investment as confidence in the recovery takes hold and improving household spending power as wages finally start to climb more quickly than consumer prices.
“The latest survey suggests that the tech sector again outperformed the UK economy in terms of job creation, reflecting widespread optimism that workloads will continue to expand over the months ahead. Moreover, a buoyant mood among tech companies about future job hiring intentions bodes well for growth in the year ahead and is a further signal that the UK economy is set to continue its upward ascent over the course of 2014.”
Tech Monitor UK is a new quarterly report by KPMG, featuring survey data from a panel of tech sector executives within Markit’s widely-watched UK Purchasing Managers’ Index (PMI) surveys, providing a reliable and up-to-date assessment of tech sector growth.
For more information, visit www.markit.com