As the Labour government reaches its 100-day milestone, the tech industry is still grappling with slow momentum. Although there was a brief uplift in market sentiment post-election, concerns about the economy and ongoing geo-political uncertainties have tempered expectations. Key events, such as the October 30th budget and the US presidential race later this year, are contributing to market volatility and hesitation.
Businesses are continuing to show apprehension ahead of the budget next week, especially around potential tax changes and the government’s efforts to plug their £40bn deficit. Possible hikes in capital gains tax and employer insurance are major concerns; as are the changes to employment law, which are already making employers rethink their current and future workforce strategies despite being two years away from coming into force. We will be hosting a webinar with Journey HR in the next month around this, with more details to be shared soon.
Sadly, the volatility continues to play across the UK job market, with the Office for National Statistics (ONS) publishing their latest labour market data last week, which highlighted that vacancies in the UK have declined for the 27th period in a row, down by 34,000 in Q2.
Restructuring is still causing redundancies in some quarters, with payrolled employees down by 50,000 from July to September. For a lot of businesses, consolidation is the focus, and mergers and acquisitions (M&A) remain a top priority – the number of deals completed in Q3 saw a 7% increase on the previous quarter. There is an expectation there will be a flurry of activity in October as business owners rush to complete deals before the upcoming Budget on 30 October. It will be interesting to see how any changes the Chancellor announces may impact the appetite for M&A activity.
While the challenges are clear to see, there is plenty of room for optimism:
- UK health tech starts ups raised $2.3 billion in 2024 year to date – including nearly $1 billion in Q3 alone – making it the UK’s fastest-growing sector
- The UK ($12.4 billion) remains the number one destination in Europe for startup innovation and investment this year, having raised almost as much VC funding as Germany and France combined ($13.2 billion). London-based startups alone attracted $8.7 billion, reasserting its status as Europe’s premiere innovation ecosystem
- Investments in generative AI startups topped $3.9 billion in Q3 in 2024
These indicate that despite the challenges, the UK tech ecosystem is still demonstrating resilience and growth potential. As we move forward, the tech industry will be watching closely for policy changes from the government that could either hinder or help sustain this momentum. Tax reforms, changes to employment law, and other regulatory decisions could reshape the business landscape. However, if the current trajectory of innovation and investment continues, the UK tech sector will be well-positioned to weather the storm and emerge even stronger in the year ahead.
It’s crucial for businesses to stay flexible, innovative, and adaptable, while embracing the opportunities that change brings—whether through evolving organisational structures, new technologies, or talent and retention strategies. If you’d like to discuss any of these topics or have any questions, we’re here to help – feel free to reach out to us: hello@arrowsgroup.com.
