Tech Sector Growth at Weakest Point in 3 Years

IHS Markit report shows significant loss of momentum for UK Tech

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Tech Sector Weak Growth
Unified Communications

Published: January 29, 2019

Rebekah Carter - Writer

Rebekah Carter

A recent report from IHS Markit, one of the world leaders in analytics and critical information for major economic markets, suggests that the Technology sector in the UK has seen a slow-down since the final quarter of 2018. Despite this, much of the technology industry remains positive about the potential that 2019 holds for additional growth.

According to IHS Markit research, the tech sector saw a complicated end to 2018, marked by the reduction in business activity to its lowest point in 3 years. New opportunities for work were limited, and Brexit-related uncertainty has meant that global trade has experienced some friction.

Slowest Rate of Expansion for Years

The KPMG UK Tech Monitor Index – designed to measure the performance of sector-wide business activity, remained at 52.4 for the technology space in Q4. This means that Tech is hovering above the critical 50.0 no-change value. Despite the slowdown, technology is still experiencing the upward-growth trend that began in 2012.

Although the situation might not be dire yet, the latest reading was done from a more reassuring 54.0 in Q3 of 2018, pointing towards the slowest rate of technology business expansion since 2015 (Q4). Around the country, technology brands also revealed the sharpest fall in work backlogs that the industry has seen for 7 years – suggesting that there aren’t enough new projects available to replace completed work.

As the available work in the industry falls, staff hiring has also seen a significant reduction. Many businesses have responded to the subdued business environment by deciding not to add any further staff to their team at the end of 2018. Fortunately, employment numbers for the UK continued to rise overall in Q4, despite the slowdown.

The IHS Markit report also suggested that the demand for higher wages might have been responsible for driving up operating expenses at tech firms recently. A skills-short market means companies are paying more for the right talent.

Business Outlook Remains Positive

Even with less-than-ideal circumstances in the tech market today, the industry remains positive. As IHS Markit looks ahead to 2019, they believe that there are many positive signs in the distance. Although technology firms have reported that their projections for growth in demand have reduced, they’re still very upbeat about their plans for capital expenditure. Additionally, a positive history of R&D spending will also continue to drive confidence around new product launches according to the IHS Markit survey respondents.

Going forward, Tech companies also appear to be in an excellent position to accelerate job creation in the UK. Around half of the surveyed respondents said that they expect to boost their number of employees in the months ahead. Less than one in ten companies said that they expected a reduction in their workforce.

 

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