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UK tech sector grows at fastest speed for a decade, says KPMG / Markit PMI survey

The UK technology sector is seeing strong inflows of new work driving the steepest expansion of business activity for almost a decade and the largest improvement in profitability in six years, according to the latest Q42013 KPMG/Markit Tech Monitor UK report.

Admittedly, the sector did suffer in the wake of the 2008 financial crisis, as all sectors did, but the UK tech scene is recovering fast says the KPMG/Markit survey, with almost 44% of UK tech firms saying they plan to hire more staff during 2014 and only 7% expecting a fall [to see more UK FS job predictions from PwC/CBI please click here].  

The UK Tech Sector Purchasing Managers’ Index (PMI) survey data is the basis for the Q42013 KPMG/Markit Tech Monitor UK report. The PMI data is derived from a representative sub-category of approximately 150 tech companies within Markit’s regular PMI economic surveys of UK manufacturers and service providers. Tech is defined in the report as technology software, technology services and manufacturers of technology equipment. All figures are seasonally adjusted and smoothed over the year using a three-month moving average, to better highlight underlying trends in the data.

In December, the index measuring UK tech sector business activity posted above the crucial 50.0 no-change threshold for the sixteenth 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 from the report include:

• Around twice as many UK tech firms (27%) intend to increase their investment in capital expenditure (capex) in the next 12 months, as opposed to those that anticipate a reduction (13%).

• The East of England ranks third out of eleven UK regions for its concentration of tech jobs, with London preeminent, but the ‘Silicon Fen’ area in the countryside surrounding Cambridge University is recognised as a major computing science, innovation and engineering hub.

Commenting on the latest Tech Monitor UK results, Tudor Aw, head of technology at the 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 UK recovery.

According to Tim Moore, senior economist at Markit, which provided the PMI data, the growth is being driven by improving economic conditions across developed markets and rising domestic business sentiment. “Most encouragingly, our figures suggest that the tech sector has provided a positive contribution to recent falls in UK unemployment, as tech companies reported taking on extra staff at a solid clip during the final quarter of 2013. Looking ahead, the sector seems well positioned to benefit from any increase in corporate spending patterns over the course of 2014.”