Tech sector in UK shows strongest growth for a decade
31 January 2014
The UK tech sector increased its growth during the fourth quarter
of 2013, with strong inflows of new work driving the steepest
expansion of business activity for almost a decade, according to the
latest KPMG/Markit Tech Monitor UK report.
As a result, the sector ended the year on a much firmer growth
footing than it started, with a cyclical upswing first emerging in
the spring of 2013 and picking up sharply since the autumn.
In December, the index measuring UK tech sector business activity
posted above the crucial 50.0 no-change threshold for the sixteenth
successive month — at a healthy 61.0 — which highlighted a continued
strong rebound in tech growth since the soft patch reported through
the summer of 2012. Indeed, tech output growth has now accelerated
to its fastest since that reported in February 2004.
Other key findings for Q4 2013 are:
- UK tech companies report fastest improvement in
profitability for six years;
- Solid rate of tech sector job creation maintained at the end
- Almost 44% of UK tech firms plan to hire more staff over
year ahead, while 7% expect a fall;
- Around twice as many UK tech firms (27%) intend to increase
their capex in next 12 months as those that anticipate a
- East of England special feature: East of England ranks third
out of eleven GB regions for concentration of tech jobs;
‘Silicon Fen’ area of Cambridge and South Cambridgeshire is a
major hub within this region.
Commenting on the latest Tech Monitor UK results, Tudor Aw, Head
of Technology at KPMG, said: “These figures prove once more that the
UK tech sector is going from strength to strength. The last quarter
of 2013 saw the sector’s best growth performance in almost a decade,
with a sharp increase in business activity, a rise in new orders and
an increase in profitability despite higher costs. More importantly
the sector showed again solid rates of job creation, well above the
rates in other sectors of the economy.
“UK tech companies are also more confident about the business
outlook than firms in other industry sectors, with growth
expectations at tech companies well above UK private sector average,
underlining the impact the sector has on the country’s economic
performance and the important role tech companies play in the
“Our report also shows that contrary to the popular belief that
the UK lags behind the US tech sector, as trends in UK tech business
activity closely match the performance of the Nasdaq. These results
show that we can be very proud of our tech companies and the
strength of the sector in the UK.”
Looking at job creation patterns over the course of the past few
years, our survey data highlights that tech companies have been on a
sustained staff hiring spree since the global economy started to
emerge from recession in late 2009.
In December, the index measuring UK tech sector employment was
comfortably above the neutral 50.0 value - at 53.9 - despite
slipping to its lowest reading since August. The latest figure
extends the current period of continuous jobs growth in the tech
sector to just over four years. Meanwhile, the index measuring UK
tech sector profitability rose to 55.3 in December, indicating the
fastest pace of growth for six years (when the index hit 56.2 in
The latest Markit Global Business Outlook Survey, which was
conducted in October 2013, showed that 43.9% of UK tech companies
plan to raise their staffing levels over the next 12 months, while
only 7.0% forecast a drop. The resulting net balance of +36.8% is a
reading unsurpassed in the four-year series history.
Strong hiring intentions for tech are accompanied by plans for
increased investment spending. Around twice as many firms (27%)
forecast a rise in capex as those that anticipate a decline (13%).
Tim Moore, Senior Economist at Markit, added: “Improving economic
conditions across developed markets and rising domestic business
sentiment have helped propel the UK tech sector to its fastest
growth performance for almost a decade.
“Most encouragingly, our figures suggest that the tech sector has
provided a positive contribution to recent falls in UK unemployment,
as tech companies reported taking on extra staff at a solid clip
during the final quarter of 2013.
“Looking ahead, the sector seems well positioned to benefit from
any increase in corporate spending patterns over the course of 2014.
With survey respondents buoyed by strengthening business conditions
so far this winter, a substantial proportion of tech companies now
report plans to raise their own capex and staffing levels later this
“Overall, our figures highlight that the tech sector has
established itself as a key growth engine within the UK economy over
the past five years, meaning tech companies will surely play an
important role in both boosting UK GDP and bringing down
unemployment during the months ahead.”