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UK tech sector records best growth performance for almost a decade

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As a result, the UK tech sector ended the year on a much firmer growth footing than it started, with a cyclical upswing first emerging in the spring of 2013 and picking up sharply since the autumn.

In December, the index measuring UK tech sector business activity posted above the crucial 50.0 no-change threshold for the 16th successive month – at a healthy 61.0 – which highlighted a continued strong rebound in tech growth since the soft patch reported through the summer of 2012. Indeed, tech output growth has now accelerated to its fastest since that reported in February 2004.
Other key findings for Q4 2013 are:

  • UK tech companies report fastest improvement in profitability for six years;
  • Solid rate of tech sector job creation maintained at the end of 2013;
  • Almost 44 per cent of UK tech firms plan to hire more staff over year ahead, while seven per cent expect a fall; and
  • Around twice as many UK tech firms (27 per cent) intend to increase their capex in next 12 months as those that anticipate a reduction (13 per cent).

Tudor Aw, Head of Technology at KPMG, said: “These figures prove once more that the UK tech sector is going from strength to strength. The last quarter of 2013 saw the sector’s best growth performance in almost a decade, with a sharp increase in business activity, a rise in new orders and an increase in profitability despite higher costs. More importantly the sector showed again solid rates of job creation, well above the rates in other sectors of the economy.

“UK tech companies are also more confident about the business outlook than firms in other industry sectors, with growth expectations at tech companies well above UK private sector average, underlining the impact the sector has on the country’s economic performance and the important role tech companies play in the burgeoning recovery.

“Our report also shows that contrary to the popular belief that the UK lags behind the US tech sector, as trends in UK tech business activity closely match the performance of the Nasdaq. These results show that we can be very proud of our tech companies and the strength of the sector in the UK.”

Looking at job creation patterns over the course of the past few years, our survey data highlights that tech companies have been on a sustained staff hiring spree since the global economy started to emerge from recession in late 2009.

In December, the index measuring UK tech sector employment was comfortably above the neutral 50.0 value – at 53.9 – despite slipping to its lowest reading since August. The latest figure extends the current period of continuous jobs growth in the tech sector to just over four years. Meanwhile, the index measuring UK tech sector profitability rose to 55.3 in December, indicating the fastest pace of growth for six years (when the index hit 56.2 in December 2007).

The latest Markit Global Business Outlook Survey, which was conducted in October 2013, showed that 43.9 per cent of UK tech companies plan to raise their staffing levels over the next 12 months, while only 7 per cent forecast a drop. The resulting net balance of +36.8 per cent is a reading unsurpassed in the four-year series history.

Strong hiring intentions for tech are accompanied by plans for increased investment spending. Around twice as many firms (27 per cent) forecast a rise in capex as those that anticipate a decline (13 per cent).

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