Tech Sector Momentum Slows to 2015 Levels but Outlook Is Positive – Report

The UK tech sector saw a downturn in fortunes in the last quarter of 2018, with growth and momentum at its slowest pace since Q4 2015, KPMG's UK Tech Monitor Index found.

Furthermore, backlogs of work -- common in the tech sector, where things move fast and companies have to move even faster to keep up -- have fallen to their lowest level in seven years, the report found, with new projects not coming in to replace projects completed at the end of 2018. This likely is due in part to a chain effect -- if one company doesn't have a large project with a lot of work needed, including some of that being outsourced, it means those companies to whom the work is outsourced will have less, and so on.

Hiring has also slowed from its peak in 2018, with companies now less likely to go on large hiring sprees for developers, engineers and marketers, due to reduced growth forecasts and lowered investment totals. KPMG reports that hiring has slowed to pre-2013 levels, with tech firms saying that "constrained staff availability and fragile growth projections" had contributed to this.

Many in the UK tech industry seem to be positive the sector is able to survive the uncertainty around 2019. (Image: Dylan Gillis, Unsplash)

While uncertainty begins to bite in the tech sector, the industry is much more upbeat about the business outlook in 2019 than other industries, with companies still projecting high capital expenditures, while admitting that growth has softened in the last year and will continue to do so. Because Brexit represents uncharted waters for both the government and UK firms, tech or not, there is no plan or guidance that can be offered, and therefore firms across the country must assume the worst but hope for the best. (See Is Brexit Just Another Problem to Solve? Russ Shaw Weighs In.)

Bernard Brown, vice chair of KPMG, commented on the report: "Our survey reveals that political uncertainty has dented client confidence contributing to a slowdown in growth at the end of last year. But, buoyant staff hiring and capital expenditure plans are still in place for 2019. This confidence is reflected in 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."

— Phil Oakley, Site Editor, TechX365