The UK tech sector has suffered the steepest fall in output since the global financial crisis, according to new figures from professional services firm KPMG.
In Q1 2020, business activity declined for the first time in almost eight years, with the pandemic leading to a rapid fall in non-essential corporate spending, widespread project cancellations and crippling supply chain disruption.
The sector recorded a score of 47.1 in the latest KPMG UK Tech Monitor Index, well below the 50.0 no-change mark and down from 50.1 in Q4 2019. The slump marks the fastest decline since Q2 2009, in the midst of the global recession.
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Manufacturing output suffered a particularly acute fall, triggered by factory closures in Asia that sent shock waves through international technology supply chains. UK manufacturers reported an inability to fulfil orders as a result of electronics shortages and delayed shipments of critical components from suppliers.
Tech sector slump
While the figures paint a bleak picture, technology is by no means the only sector suffering as a result of the current public health emergency. In fact, some technology segments even experienced growth, despite the turbulence.
An upturn in business continuity and cloud spend, brought about by the need for businesses to support a newly remote workforce, served to limit the decline. In March, the software services sub-category defied the overall trend, recording an increase in business activity and registering an index score of 50.8.
Further, employment numbers in the tech sector remained on a steady upward trajectory, rising in each month of the quarter and achieving the strongest rate of increase since Q2 2019.
“Although tech business confidence fell in recent months, confidence remains stronger than most sectors of the UK economy, helped by pockets of growth,” explained Bernard Brown, Vice Chair at KPMG UK.
Despite uncertainty surrounding the duration of lockdown measures and continued supply chain disruption, Brown remained chipper about the overall outlook for the sector.
“Many tech firms anticipate a bounce in demand once measures to slow the spread of the virus can be lifted,” he said.
“Their provision of critical technology infrastructure and support for business continuity will see many opportunities for the industry to make lasting contributions to the UK economy in these difficult times.”
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