Friday 1 May 2020 11:49 am

UK tech firms suffer worst quarter since financial crisis

British tech firms have posted their worst quarterly performance since the global financial crisis as the Covid-19 crisis stunts growth, new figures have revealed.

Business activity across the tech sector declined for the first time in almost eight years, according to the latest KPMG UK Tech Monitor index.

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The headline index dropped to 47.1 from 50.1 in the final quarter of last year, marking the fastest decline since the second quarter of 2009.

Tech firms blamed the sharp downturn on the outbreak of coronavirus, pointing to a decline in non-essential spending, cancelled projects and widespread closure among clients.

Among the hardest hit companies were those that manufacture tech products, as lockdowns in Asia sparked mass disruption for supply chains.

Manufacturers said shortages of electronic components and delayed shipments from suppliers meant they had struggled to fulfil orders.

Despite the sharp fall in overall business activity, some areas of the tech sector enjoyed a boost in demand due to lockdown measures.

Companies providing services related to home working and business continuity were among those to buck the trend and report growth in the first quarter.

In addition, the economic uncertainty has done little to hurt employment numbers, which rose in each month of the first quarter.

The job growth — the fastest since the second quarter last year — was largely driven by an immediate need to fill vacancies.

Lingering concerns about the pandemic have taken their toll on growth projections, and business confidence fell sharply from its peak in the fourth quarter. 

However, the tech sector remains more upbeat about the business outlook than other areas of the UK economy.

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“With UK tech companies adding to their payrolls at the start of 2020, a recovery in staff hiring was the most positive development highlighted by them so far this year,” said Bernard Brown, vice chair at KPMG UK.

“Although tech business confidence fell in recent months, confidence remains stronger than most sectors of the UK economy, helped by pockets of growth within software & services amongst growing consumer demand for relevant digital solutions to cope in ‘the new normal’.”