The industry shifted up another gear during the fourth quarter of 2013, 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. Tech output growth has now accelerated to its fastest since that reported in February 2004.
UK tech companies also reported the fastest improvement in profitability for six years, with almost 44% of UK tech firms planning to hire more staff over year ahead, while 7% expect a fall. Around twice as many firms (27%) intend to increase their capex in next 12 months as those that anticipate a reduction (13%).
“These figures prove once more that the UK tech sector is going from strength to strength," said Tudor Aw, Head of Technology at KPMG. "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 burgeoning recovery.
“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.”
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 December 2007).
“Looking ahead, the sector seems well positioned to benefit from any increase in corporate spending patterns over the course of 2014," said Tim Moore, Senior Economist at Markit. "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 year. 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.”