UK tech sector avoids economic slowdown in fourth quarter of 2014

Fourth quarter of 2014 sees second-highest profitability for tech sector since the fourth quarter of 2007

The UK tech sector saw growth in the fourth quarter of 2014, avoiding the economic slowdown experienced by the rest of the UK economy, a report KPMG and Markit has revealed.

The Tech Monitor UK survey showed the tech sector’s profitability was the second-highest for any quarter since the fourth quarter of 2007, at 55.8 on the survey's index. The index placed 50.0 as the no-change value.

According to the report, more than half of the businesses surveyed (53%) expect a rise in business activity over the next 12 months. Only 7% of those questioned forecasted a reduction.

New orders received were 60.1 on the index, up from 57.9 at the end of the third quarter of 2014.

The report stated that job hiring intentions and capital expenditure plans remain optimistic for the next 12 months, however they are less positive than what was reported midway through 2014.

KPMG partner and head of the technology sector Tudor Aw said the report showed earlier concerns about the tech sector "entering into storm clouds" were misplaced. 

"The previous survey showed while tech sector business activity had been strong, the rate of expansion had slowed noticeably. Remarkably, the final quarter of 2014 marks a period of sustained job creation in the sector that now stretches to five years – something that should be celebrated loudly," he said.

“In the run up to the general election, the message from the latest Tech Monitor UK survey is clear – the tech sector remains a star performer of the economic recovery, and the future looks resoundingly bright in terms of industry growth and job creation.”

The report also revealed the number of tech startups are on the rise and reached a seven-year high in 2014. The number of startups have increased by an estimated 40% year-on-year, according to the report.

UK tech startups were also found to have a higher survival rate (82%) than UK-wide sectors (76%).

"The survey results echo my personal view that the UK tech startup scene is vibrant and far outstripping other sectors," said Aw. "For those naysayers, it also shows they have a higher survival rate than the UK average for all startups. 

"I sense momentum is building and that it is only a matter of time when we begin to rival the west coast.”

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