Technology sector shows evidence of strong recovery

Yet further evidence of the improving macroeconomic position is provided by the increasing strength of the technology sector when it comes to recruitment.

Days past

Even as late as the earlier 1980s, Information Technology (IT) was still known as Data Processing (DP).

In those days, the sector was largely immune from the various trials and tribulations of the boom-and-bust economic model.  Even organisations in dire trouble were reluctant to shed their technical staff due to shortages in supply and the extensive lead times involved in recruiting and training up the right type of people.

However, as the 1980s progressed not only did the generic name of the industry change to IT but people working within it increasingly found themselves subject to the same employment pressures as their colleagues – at least in times of trouble.

By the time the economic traumas of the late 1980s and early 1990s arrived, IT employees were just as likely as everyone else to be in the firing line when things went wrong.

An economic barometer

As the decades have passed, the IT sector has been seen increasingly as being not only subject to, rather than immune from, those economic forces but also perhaps particularly vulnerable to them.  As such, some now regard the sector as being a form of economic barometer.

Why?

IT projects are expensive and technical staff likewise.  Even in the harsh new light of the 21st century, there is still a shortage of people with extensive IT skills in certain areas and that means they tend to command premium pay. That’s true of both permanent employees and the traditionally vibrant and bubbling IT contracting sector.

However, whereas in earlier decades the supply and demand issues were seen as reason to keep IT staff aboard at almost any cost, in more recent times the logic changed to reflect the view that when times are tough slashing and burning should be applied to the most expensive activity sectors rather than the least.

So, IT investment in projects and people is often now one of the first areas to suffer when the money starts drying up.

Improvements all round

However, a recently published study by KPMG has shown that during the recent recession, the IT sector did suffer but not quite to the same extent as others.  More pertinently, over the recent past there has been a strong resurgence in the domain and this is being taken as an indication of increasing confidence in companies which are now investing again in new IT development.

Of course, arranging for parades and marching bands to celebrate the final end to what has been one of the longest recessions on record (if not the longest) might be a little premature.

Economists know it is notoriously dangerous to start forming views about the health or otherwise of an economy based upon the performance of only one or two indicators in a limited number of sectors.  At the moment, there are those who believe that the UK’s rapidly improving economic performance still remains heavily skewed towards property and services with the result being that the recovery, though real, is paper thin.

So, while these increasingly promising figures will no doubt be seen as very good news for the staff and companies operating within the IT sector, it will remain to be seen whether it is a real harbinger of similar improvements in other sectors of the overall economy.


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Shams Urrehman
MD SkyTax

Hi, I'm Shams Urrehman, Qualified accountant since 2005 and Director at SkyTax Ltd since 2009. I have been advising freelancers, management consultancies, IT contractors, SME’s and other businesses about accounts and tax planning.

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