UK election contributes to tech sector slowdown

UK election jitters have contributed to a slowdown in the country’s technology sector in the first quarter of the year, a survey by consultants KPMG shows.

At the end of the first quarter, the tech sector UK Business Activity Index was 55.7, down from 59.6 in the last quarter of 2014 and its second-lowest level since mid-2013.

It was also well below the survey’s record high seen in the first quarter of 2014, which was 60.5.

Respondents in the survey said that spending and investment decisions, especially among public sector clients and contractors exposed to the public sector, had been delayed ahead of the UK general election and weighed on growth at the start of the year.

UK election jitters cause tech slowdown

UK election jitters caused a slowdown in new orders. Source: KPMG/Markit

The latest increase in overall new work was the slowest in nearly two years. The new orders index fell to 56.6 in the first quarter of this year from last quarter’s 60.1 – but was still above the series’ long-run average of 53.8.

This fall was mitigated to some extent by improved demand from external markets, especially the US market and from Western Europe, where the recovery from the eurozone debt crisis seemed to continue.

Demand was greater from the biotech and retail industries, and there was strong demand for cyber security products and cloud-based solutions.

Hiring in the UK tech sector increased at a record pace. The index measuring tech sector employment was 57.8 at the end of the first sector from 55.3 at the end of last year. It was the highest reading of the index since the survey began in 2003.

The tech sector has a positive outlook for the next 12 months, with 55% of the companies in the survey saying they expect a rise in business activity over the period, compared with 7% expecting a decline.

The outlook for jobs is positive too, with 41% expecting to add to their existing employees and just 9% forecasting job cuts.

The tech sector has seen three times the rate of job creation across the UK economy as a whole since the post-recession low hit by job creation in 2010.

KPMG estimates that the UK tech sector directly accounts for at least one million jobs in the UK currently.

The data for the report was derived from a representative sub-category of around 150 technology companies within Markit’s regular purchasing managers’ index surveys of UK manufacturers and service providers.

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