Written by James Orme Mon 12 Aug 2019

Wider economic downturn finally hits the typically resilient tech sector

Growth in the UK tech economy has eased for the first time in seven years, with Brexit uncertainty and cuts to corporate spending blamed.

The KPMG UK Tech Monitor Index, which measures the economic strength of the sector, revealed growth had dropped from 54.4 points in the first quarter of 2019, to 53 in the second quarter.

If a sector shows no growth or decline it receives a score of 50. While the UK tech sector has consistently remained above this threshold since 2012, performance in Q2 2019 suggests the sector is heading towards the second-weakest rate of growth for three and a half years.

According to the report, which surveyed tech leaders across the country, poor overall performance in the UK economy is a major factor, followed by corporate spending cuts prompted by uncertainty surrounding the UK’s future relationship with the EU.

While there was an increase in the volume of tech sales in the quarter, a decline in new purchase orders weighed down overall business activity.

“The slowdown in both sector growth and employment growth during the second quarter of 2019 is perhaps unsurprising given the slide in business optimism reported at the start of this year and the challenging global economic landscape,” said Bernard Brown, vice chair at KPMG.

“Delays to business investment decisions and greater risk aversion among large corporates are likely to hold back UK tech sector performance during the second half of 2019, but exporting firms could feel a boost to sales from looser central bank policy in the US and euro area. While it is tempting to sit tight, businesses must act with an entrepreneurial and resilient spirit before we’ll see a significant, positive change in market confidence, furthermore reflected in the job market.”