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KPMG survey shows positive expectations for tech firms in 2020

Feb 21
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KPMG survey shows positive expectations for tech firms in...

The UK technology industry experienced a challenging year in 2019, but this hasn't stopped businesses from adopting a positive attitude for the year ahead, according to recent research.

KPMG's latest quarterly survey of corporate activity across the tech sector showed a sustained decline in new business at the end of last year.

Positive signs

Recorded volumes of incoming new work were on a downward trend since the middle of 2019, but the rate of decline was modest in Q4 and lower than in the previous quarter.

Despite last year's difficult conditions, tech firms appear to be looking ahead to 2020 with optimism, partly because of the increased clarity around Brexit.

A recent easing of tension in the long-running trade war between the US and China was also cited as a potential factor in the positivity.

The level of optimism in relation to business activity in the coming 12 months was the highest recorded by the survey since the third quarter of 2018.

Tech businesses cited the opportunities that could arise from the 5G rollout as a key contributor to their positive outlook, along with new product innovation and potential to expand into overseas markets.

From a financial perspective, the overall rate of cost inflation in the final quarter of 2019 was weaker than at any time since Q2 2016, even though higher salaries and the weak pound continued to push up operating costs.

This supported the optimistic outlook by reducing pressure on profit margins.

Bernard Brown, vice-chair at KPMG UK, said the tech sector is "starting the new decade on the back foot", but there are "encouraging signals" for the near future.

He added: "Investment and innovation in areas related to 5G technologies, automation and AI will no doubt spur on product launches and create new markets for UK tech businesses that have the potential for global impact and reach."

Driving growth

Separate research by KPMG released in July 2019 showed that UK businesses showed the greatest willingness to drive growth by challenging established methods. This was despite less than half of UK company leaders displaying confidence in prospects for global economic growth over the next three years.

The UK showed the strongest appetite for establishing accelerators and incubators for start-ups (69%, compared to 60% globally), for partnering with third-party data providers (65% to 49%) and for adopting cloud technology (56% to 50%).

More than nine out of ten UK chief executive officers (93%) said they viewed technological disruption as an opportunity rather than a threat.

Mr Brown commented: "It may be surprising for some to learn that in the current climate UK leaders are more willing than their global counterparts to shake things up, but 'transformation', 'digital capabilities' and 'resilience' can't simply be buzzwords. If these CEOs want to lead businesses that not only endure uncertain conditions, but businesses that will ultimately thrive, acting on these themes is vital."

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