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UK tech sector sees major slowdown

(Image credit: Image source: Shutterstock/everything possible)

The UK tech sector is still growing, but this growth hs dropped to its slowest pace in the last seven years, according to a new report by KPMG.

The firm claims that a weaker pound paired with uncertain domestic and international political climate, are creating a perfect storm for a slowdown in the economy.

The tech industry is still doing better compared to everything else, though, as the Q3 KPMG UK Tech Monitor Index gave the UK tech sector a 51.9 score for the quarter, down from 52.9 a quarter before. A score of 50 separates expansion from contraction.

Some of the main reasons for the slowdown include the US-China trade war, Brexit, and the weaker pound. These three have resulted in a drop in new orders received by UK tech sector companies – the highest since Q4 2011. Companies are also slowing down on hiring as reduced capacity pressure and concerns about the near-term business outlook has organisations looking more cautious towards the future. The expansion of the workforce has thus ended, after ten consecutive years of growth.

Looking at the 12 months ahead, businesses don't expect any spectacular changes and believe the market will remain subdued, mainly because of the Brexit conundrum.

Those companies that expect to grow, look to new products and technologies to give them the necessary nudge, as well as to a rebound in export sales.

“The latest reading shows that continued uncertainty in the UK amidst signs of weaker global economic growth is weighing on the performance of UK tech firms. Businesses are losing confidence and combined with activity expectations nearing lows last seen during the recession, it is easy to see why. Any positive growth forecasts cited for 2020 are often dependent on a clearer path to Brexit in the coming months, painting a pretty gloomy picture,” commented Bernard Brown, vice chair at KPMG UK.

“Worries over the outlook may seem well-founded as tech companies recorded the steepest drop in new orders in eight years alongside reports of cancelled or delayed spending on projects.”