The UK’s thriving tech sector suffered its worst quarter since 2012 at the end of last year as political uncertainty took its toll on growth.
Staff hiring declined and new business activity flatlined in the final three months of 2019, according to figures published today by KPMG.
UK tech firms reported that overall business was unchanged from the previous quarter, marking the worst performance for the sector in more than seven years.
Respondents said a combination of political uncertainty and subdued global trade contributed to the flat growth, while a number of tech firms blamed hesitation over spending among clients in the run-up to the General Election in December.
This uncertainty had its greatest effect on staffing levels as companies delaying hiring and became more risk averse, and the fall in payroll numbers was the steepest recorded since 2009.
New business also dropped in the fourth quarter, though the rate of decline was softer than in the previous three months.
Overall, KPMG’s tech monitor index read 50.1 in the fourth quarter, down from 52.0 in the previous period. This was only just above the 50.0 neutral threshold that separates expansion from contraction, and the lowest reading since the second quarter of 2012.
Despite the stark numbers, tech companies reported upbeat business expectations for 2020 due to hopes of greater clarity around Brexit and US-China trade tensions.
Firms pointed to opportunities from the 5G rollout, new product innovation and expansion into overseas markets, and the degree of optimism for the coming 12 months was the highest recorded since the third quarter of 2018.
“Although our latest findings show that the UK tech sector is starting the new decade on the back foot, there are some encouraging signals for tech sector prospects in 2020,” said Bernard Brown, vice chair at KPMG UK.
“With the General Election and Brexit day officially out of the way, it would seem that recent political and economic uncertainty is now paving the way towards more optimism, reflected in the sharp rebound in business confidence towards the year ahead outlook.”
He added: “Finally, investment and innovation in areas related to 5G technologies, automation and AI, will no doubt spur on product launches and create new markets for UK tech businesses that have the potential for global impact and reach.”