UK tech sector bounces back amid 'economic gloom' - KPMG
New data shows UK tech sector optimistic about growth over next year and bucking hiring trend seen in wider economy
Business activity in the UK tech sector bounced back in the third quarter, according to research from KPMG.
The services firm's quarterly report - compiled by IHS Markit - revealed the surge in business activity came after a drop in activity amid the COVID outbreak and lockdown in March.
KPMG's Tech Monitor Index reported that the sector "jumped back" into expansion mode in Q3, signalling the fastest increase in output at UK tech firms since the first quarter of 2019. Output from the industry has now returned to a "solid" growth path in Q3 as the economy slowly reopened and customer projects resumed.
"The UK tech sector shines a ray of light through the economic gloom," stated Bernard Brown, vice chair at KPMG UK.
"The sector has demonstrated huge resilience with a strong V-shaped recovery in business activity over the last quarter with a positive outlook for the future, in spite of the uncertainties presented by COVID-19. This growing confidence and resilience of an increasingly significant sector should be good news for the government in helping towards rebuilding a future-proof economy."
KPMG uses its Tech Monitor Index to measure increasing or decreasing business activity, with anything over 50 representing growth.
(Data courtesy of KPMG, IHS Markit)
The report also supported recent research from CompTIA that there was a resurgence in tech job postings. KPMG reported that staff hiring trends across the tech sector have been "far more resilient" compared to the wider UK economy this year and that employment numbers among tech companies moved closer to stabilisation.
This hiring trend comes despite a number of companies slashing their corporate spending in Q3 because of the uncertain global economic outlook, according to the research.
However, the index reported that new business rose from a "record low" of 29.7 on the index to 48.2 - still under the 50 level that indicates growth. This is indicative of overall weak demand, KPMG stated.
Overall, UK tech firms are optimistic about their growth prospects for the next 12 months, reflecting hopes of a sustainable recovery in customer demand, the report added.
Ian West, head of tech, media and telecoms at KPMG UK, stated: "With business closures, project cancellations and lower overall corporate spending defining the early stages of the COVID-19 pandemic, the record drop in business activity at that time was expected. All of these factors combined to offset the boost in other areas of the tech industry caused by a surge in consumer demand for digital services during the lockdown period.
"It's emboldening to now see the cautious optimism reported by tech firms in the Tech Monitor, which reflects the conversations we are having with TMT clients in the face of economic uncertainty. The UK's reputation in innovation, buoyant start-ups and disruptive technological advances are proving true once more."