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July 31, 2014

UK tech sector records massive growth

Mainly driven by rapid business activity expansion, boom is highest since 2007.

By CBR Staff Writer

The UK technology sector experienced its highest growth level since the onset of the financial crisis in 2007, mainly driven by rapid business activity expansion, the latest KPMG report noted.

Co-authored with Markit Tech Monitor UK, the report noted that about two third of the 150 tech firms surveyed, reported a solid recovery in year ahead expectations for business activity, with 43% considering recruiting more staff.

KPMG Technology head Tudor Aw said: "The UK tech sector is firing on all cylinders with sustained growth outstripping the wider economy.

"Importantly, this good news story looks like it will continue in the year ahead with many tech companies planning to loosen the purse strings to hire staff and raise capital expenditure."

About 43% of the overall surveyed firms considered increasing their capital expenditure plans within the tech sector, which is more compared to the earlier recorded 37.5%.

Aw added: "Our data also shows UK tech business activity closely matches the movement in the NASDAQ, suggesting that the perceived six to 12 month lag of UK tech behind the US may be an urban myth.

"A potential blip on the horizon however relates to the 6 point fall in the backlog of work.

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"It is too early to tell if this is due to efficiencies and increased hiring or something more worrying, but it will certainly need to be monitored in the coming months."

The report also added that tech firms are planning to start hiring for the upcoming 12 months, regardless of the delay recorded during Q2, with 43.1% of them plan to expand their payroll numbers, while 5.9% expect to slash staff.

Markit senior economist Tim Moore said: "The latest survey provides a resoundingly bullish snapshot of UK tech sector performance in 2014 so far, with companies in the midst of their strongest overall growth phase for at least seven years.

"Not only is the tech sector enjoying a longer and steeper growth upswing than the wider UK economy, but a broad spectrum of tech companies continue to report confidence in terms of job hiring and investment spending for the next 12 months.

"A thriving domestic tech sector has been supported by more favourable conditions across the UK economy, providing a positive backdrop for innovative companies looking to enter new markets and tap stronger spending patterns among businesses and consumers.

"Moreover, with many businesses now looking to respond quickly to the rising economic tide, UK tech companies should be well poised to grease the wheels of growth by offering innovative solutions and boost efficiency across a range of sectors."

According to Moore, the moderation in tech recruitment during the second quarter of 2014 would be unlikely to continue given the strong staff hiring objectives and investment forecasts reported by tech firms.

Moore added: "On the job hiring front, the latest figures suggest tech companies have taken a slight breather after several years of breakneck growth, contrasting with the scramble to boost employment in other areas of the economy, such as house building, that have seen prolonged cuts to capacity prior to the recent rebound."

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