Is The UK Tech Market Slowing Down Ahead Of Elections?

With the UK general election scheduled for July 4th, the technology sector is watching closely to understand how potential changes in government and policy might shape the future. Current polls suggest a strong lead for Labour, raising questions about their impact on tech companies and broader market trends.

AI And Government Strategies

AI remains a focal point, with both the incumbent and the Labour Party with a focus on safety and ethical factors to think of. This bipartisan focus suggests continued support and development for AI technologies, which could create a stable space and infrastructure for tech innovation regardless of the election outcome.

Market Reactions To The Election

Prime Minister Rishi Sunak’s decision to call an early election follows positive economic data, with inflation falling to 2.3% in April. This move is seen as a strategic way to leverage the improving economy. According to Emmanouil Karimalis, a rates strategist at UBS, the timing of the election may alleviate some market uncertainties, given prior speculations about additional fiscal stimulus.

Historically, Labour victories have been associated with a 6% uptick in the MSCI UK index within six months, while Conservative wins typically see a 5% decline. Analysts predict that the market reaction this time could range from neutral to slightly positive, due to the minimal fiscal policy differences between the parties.

Key Areas Of Focus

Interest Rates and Inflation: Investors are keeping a close watch on interest rates, which will influence sterling, stocks, and bonds. The trajectory of inflation is another critical factor shaping market sentiment.

Debt and Fiscal Policy: The UK’s substantial debt and borrowing requirements will continue to be a focal point. Both parties are expected to maintain a disciplined approach to fiscal management.

Labour’s Economic Plans: Labour’s agenda includes promoting productivity through tech innovation and maintaining fiscal discipline. These plans could provide a supportive environment for tech companies, particularly those involved in AI and digital transformation.

Stock Market Trends

Post-election market behaviour often varies, with defensive stocks and financials generally performing well. This pattern may persist, especially given the current economic backdrop and political landscape.

Overall, the tech sector remains cautiously optimistic, anticipating stable support for innovation and development from either government. Investors will continue to monitor policy announcements closely as the election date approaches.
 

Expert Predictions On The Tech Market

 
We asked experts if they think the tec market is slowing down, or if it will, ahead of the elections, and this is what they shared…
 

Ben Litvinoff, Associate Director Technology & Transformation, Robert Walters UK said;

“We haven’t seen any pull back in live roles or searches in Tech, as of yet.

“However, I would anticipate that some financial firms might look to postpone headcount in light of any revision / adjustments in statutory requirements or regulatory policy. There could also be some slow down across utilities and infrastructure hiring on account of the oppositions marquee manifesto pledges which may impact these sectors.

“Ultimately, business likes consistency and any election is likely to see some companies showing increased caution and reconsider strategies for success based on the likely outcomes!”

TechMarketView’s Chief Analyst, Georgina O’Toole, said;

“Uncertainty is a growth suppressant. Across Whitehall, with the previous expectation of an autumn election, we had already witnessed changing behaviours. Departments had sought to spend their budget ahead of a pre-election hiatus, while in parallel, delaying any major decisions that might be reversed under a new government.

“Meanwhile, in the private sector, we have witnessed economic uncertainty translate into caution and a stifled—and more challenging—UK tech market.

“Now, the date of the General Election is a certainty. But who will be in power is not. In Whitehall, the ‘pre-election period’ will arrive sooner than expected.

“It will slow the UK public sector tech market down over that period and post-election it will take time for any new policies to be implemented and new procurement activity to pick up.

“Suppliers to the public sector (central government, defence, and health in particular) are in for a tough ride the next few months. We are unlikely to see much of a pickup until Q4.

“Meanwhile, in the commercial sector, recent positive news on inflation and on interest rates had the potential to give organisations the confidence to start making some bigger investments (although wider global turbulence remains); however, the election brings new uncertainty.

“Will a new government and a different economic policy change the current direction of travel? In the short term, we will also likely see a slowdown in private sector decision making too.”

Martin Hartley, Group CCO, emagine said;

“I think the tech market is slowing down in terms of hiring in anticipation of a potential new government. Companies of all sizes are likely erring on the side of caution as they want to wait and see what the economic landscape will look like, but I think they will be operating as usual.

“We are seeing an increasing demand for short-term contract work to fill talent gaps, and that significantly reduces the financial commitment.

“When it comes to technology, the government parties are similar in the way they operate, so I don’t think there will be major changes to the industry. The Data Protection and Digital Information Bill (DPDI) and the Media Bill are still pending and tech experts are interested in getting them over the line before a new government comes in, but time is ticking.”

Roy Shelton, CEO,  Connectus Group, said;

“Typically, when a general election is called it brings an increased level of uncertainty around the business community and we especially feel it in the tech space. In 2017 when Jeremey Corbyn announced if Labour won the General Election, that the Labour party would provide broadband free to everyone, it sent shockwaves through the industry with suppliers, vendors and the investment community put the brakes on everything.

“R&D and technology spend is always frozen or reduced during times of uncertainty and this will be no different as we try to understand and second guess what is going to be the outcome on the 4th of July. This is even further marred by the US elections later in the year as we often feel the ripples across the pond.

“Regardless of who wins the race for Number 10, or the White House companies will reduce and suspend investment until the dust settles, I feel investment will only continue in core and mission critical services and close to completion projects.

“This may last well in to 2025 as we start to experience the outcomes from new manifestos. Things I am most mindful of are changes in R&D tax reclaims and capital allowances as these fuel growth in the tech sector.”