UK IT consultancy businesses are becoming increasingly confident about their financial prospects, according to a new survey by Integro Accounting.
The positive outlook is in stark contrast to the deepening gloom in many other sectors of the economy, such as retail, housebuilding, and hospitality.
Integro Accounting sampled thousands of businesses across the UK, and found the tech sector to have the most confidence across the board compared to other industries.
On the questions “How much confidence do you have that your business will survive the next three months?”, 89% of IT consultancy businesses that they are highly confident, with only 1% having low confidence. This is a steady improvement over the last three years, with only 79% and 76% reporting high confidence when asked the same question in 2021 and 2020 respectively.
Further, over half (57%) of the UK IT consultancy businesses surveyed feel business performance will increase during 2023, with only 2% believing that performance will decrease – a marked contrast to other sectors in the economy, with only veterinarians coming close to the same level of optimism.
Talent shortages in the IT sector are also easing, with over two thirds (67%) of IT business leaders reporting that they are not experiencing a shortage of workers, up from 62% at the end of 2021.
Christian Hickmott, Managing Director of Integro Accounting, comments: “While many IT consultancy businesses struggled during the pandemic, they have generally shown greater resilience and emerged in a much stronger position than most other sectors of the economy.”
“Despite the economic upheavals of the last few years the UK’s tech sector is rebounding strongly at a time when many other sectors of the economy are contracting. Covid-19 policy accelerated market shifts that have outlasted the pandemic, which has been to the benefit of much of the UK’s tech sector but to the detriment of other sectors of the economy.”
He added: “Businesses are continuing to invest in digital transformation projects to drive productivity gains as a way of lessening the impact of inflation. This should provide a boost in demand for tech skills.”
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Despite the generally positive news for the IT sector, however, there is growing evidence that inflation is eating into the profit margins of the IT businesses with the majority reporting that they are having to absorb costs, rather than pass them on to clients.
43% of IT businesses are reporting that they have absorbed the cost of price rises, while only 17% have successfully passed on price rises to customers.
Christian Hickmott says: “While inflationary pressures are clearly having an impact on the overheads of IT businesses, most other sectors of the economy are faring worse in terms of having to absorb those costs. Strong demand for software and IT services puts tech businesses in a relatively stronger position when negotiating price increases with customers.”
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