Tech firms more confident than the average business

Monday 4 August 2014

Contractors in the IT sector will certainly have their plates full over the coming year, as tech firms continue to invest in growth, including new staff.

The latest KPMG/Markit Tech Monitor UK survey revealed that companies in the sector are more confident than the average business. Indeed, tech firms have a net balance of +54.7 per cent when it comes to positivity over the next 12 months, compared to +51.7 per cent among other industries.

This is matched by strong hiring intentions, with 43.1 per cent of tech businesses planning to expand their headcount over the year. Just 5.9 per cent of companies expect to have to get rid of staff.

These positive sentiments come after a robust quarter of growth between April and June, which was the fastest rate of expansion since the onset of the financial crisis in 2007. Sixty-one per cent of businesses noted a 'solid upturn in year-ahead expectations for business activity'.

This has served to boost investment plans, with 43 per cent anticipating an increase in capital expenditure. This is up from the 37.5 per cent noted in the previous quarter and the most upbeat percentage recorded since data was first collated in 2009.

Tudor Aw, head of technology at KPMG, said: "The UK tech sector is firing on all cylinders with sustained growth outstripping the wider economy. Importantly, this good news story looks like it will continue in the year ahead with many tech companies planning to loosen the purse strings to hire staff and raise capital expenditure.

"For the first time since 2007, there is also a welcome upturn in Tech IPOs which hopefully signals the beginning of a comeback of Tech companies to the London Stock Exchange, something that will be important in convincing tech start-ups that the UK is the right place to be."

This will be a crucial factor in encouraging more IT professionals to go it alone as limited companies or sole traders. New businesses will need the assurance that the industry in which they work can access investors and other forms of finance. This in turn will give the UK access to the innovation it needs.

Of course new companies will be encouraged by increases in profitability for tech companies. The number of businesses reporting a rise during the second quarter of the year hit the 54.7 mark on the index, signifying growth. Respondents to the survey suggested this was thanks to new work intakes, higher average selling prices and relatively subdued input cost inflation.

However, the pace of job creation is starting to slow amid all this growth. In Q2 employment prospects reached 52.2 on the index, falling from 55.7 in Q1. This may signify that the steep rates of job creation in the tech sector seen over the last four years are coming to an end.

Nonetheless, UK tech companies are only becoming more competitive. "Our data also shows UK tech business activity closely matches the movement in the NASDAQ, suggesting that the perceived six to 12 month lag of UK tech behind the US may be an urban myth," Mr Aw explained. Yet businesses can't afford to get too confident, as a six point fall in the backlog of work was also noted. Mr Aw claims it is currently too early to tell why this happened, by it efficiencies, increased hiring or something worrying.

By Victoria McDonnell

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