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August 19, 2015

Greek crisis and UK election disrupts tech sector growth

Strife at home and abroad caused economic performance to stall.

By Jimmy Nicholls

Uncertainty in the general election and the Eurozone dampened activity in the UK’s technology sector during the last quarter, even as other measures for the industry remained strong.

The pace of growth in Q2 of this year was the weakest since Q1 2013, with many in the industry putting it down to declines in sales volumes caused by questions over who would win the general election and whether Greece would be forced to drop the euro.

Despite this gloom the sector still managed to increase profits, according to the consultancy KPMG, whose index recorded a rise from 52.6 in the first quarter to 54.3 in the second.

Added to this was a heightening of demand for technology workers, an indication that the industry expects to see strong workloads in the future.

"Happily, it looks like Tech companies were just pressing the pause button as our survey also shows that despite this Q2 slowdown, tech companies are very upbeat about the future, forecasting an upturn in profitability, strong job hiring intentions and continued investment in capex," said Tudor Aw, partner and head of technology sector at KPMG.

"This is consistent with what I am hearing from Tech companies, that business activity is coming back strongly post-election uncertainties and that there are tailwinds from benign economic conditions, increasing maturity of cloud solutions and customer needs to address their IT infrastructure as growth picks up."

More than half of the companies surveyed by the consultancy said they expected an increase in business activity in the next year, with a mere 6% foreseeing a decline.

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Half of the respondants also forecast a rise in payroll numbers, the strongest sign of increased hiring in the British technology sector since October 2009.

Previous research by KPMG showed that the tech sector outperformed all other industries in the UK during 2014 in terms of growth and business activity.

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