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Tech investment drops on slowing economy

Written by Hannah McGrath
12/08/2019

Investment in the UK’s tech sector slowed down in the second quarter, as the wider economy showed sign of weaker growth, according to the latest industry survey from KPMG.

Whilst the industry continued to outperform other sectors in the three months to July, data from the professional services firm showed that staff hiring plans were at their lowest point for two years.

The KPMG UK Tech Monitor Index, which measures the strength of business activity across the sector, dropped from 54.4 in the first quarter to 53 in the second quarter, to signal a softer rate of growth than at the start of 2019.

The latest reading signposted the second-weakest rate of UK tech sector growth for three-and-a-half years. Meanwhile, new business has also softened, as firms felt the impact of Brexit-related uncertainty filtering through the wider economy.

The second quarter saw a moderate sales volume increase at tech companies, contrasting with the decline reported by other areas of the UK economy. Tech firms cited a strong pipeline of new product innovation and entry into overseas markets as their leads for new work.

However, the latest rise in total new orders received by tech firms was among the weakest recorded since 2015. Sluggish demand from domestic customers was one of the reasons often cited by survey respondents, as political uncertainty encouraged some clients to postpone new projects.

Bernard Brown, vice chair at KPMG UK, said: “Innovative tech software, services, manufacturing and equipment is at the heart of any business wanting to succeed in today’s market, so it is heartening to still see sales volume up and growth in the sector despite it beginning to feel the effects of political and economic uncertainty.

“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.”