Despite the growth in business activity recovering to its highest level in nearly a year, the optimism in the tech sector of the United Kingdom has plunged to a 10-year low.
Tech companies reported that Brexit-related uncertainty and a suppressed global economy had the potential to dampen corporate spending, alongside concerns of a skills shortage for the sector impending growth.
The latest UK Tech Monitor Index by KPMG, an auditing giant, reveals that business activity rebounded despite the gloom to a score of 54.4 in the first quarter, with readings higher than 50 presenting increased trading in the sector.
It signified a sharp improvement on the 52.3 reading during the previous quarter and was well above the overall sluggish 50.6 reading of the economy of Britain– a six-year low.
Companies in the sector, which includes technology equipment manufacturers as well as technology software and services providers, attributed faster sales growth to resilient demand from the United States and from diversification into new overseas markets.
However, the positive growth and overseas activity do not seem to be enough to lift confidence in the sector.
KPMG discovered that businesses have become less optimistic regarding the next 12 months. Its index of business sentiment plunged from a positive reading of 69.8 at the end of the previous year to 65.6 at the start of 2019.
While the rate of employment growth continued to be among the weakest since 2013 in the first quarter of the year, 43 percent of tech companies said that they expected to boost their workforces in the next 12 months, while only 11 percent forecasted a reduction.
The vice chair at KPMG UK, Bernard Brown, stated: “The latest Index ultimately outlines the resilience of the UK tech sector and the strength of its ability to compete globally.”
He added: “It’s encouraging to see tech firms’ output and order books rebound from the low levels of growth seen at the end of 2018, as corporate demand for technology services and a healthy pipeline of new product launches supported sector growth in [quarter one].”
He continued: “While business may be concerned about global economic headwinds threatening customer spending, confidence is being buoyed by long term trends where we have a track record for innovation.”
Brown noted: “Advances in AI-enabled enterprise software, innovation in fintech and strong demand for cloud technologies are all excellent opportunities for the sector to grow in the year ahead.”