Confidence levels among tech startups have slumped since the start of the year as the coronavirus crisis takes its toll on the UK’s thriving tech sector.

Just 32 per cent of businesses are confident or very confident that their turnover will increase in the year ahead, City A.M. can reveal.

Read more: Coronavirus: British tech firms welcome government’s £1.25bn startup package

This marks a quarterly drop of 42 per cent and is almost 50 per cent lower than this time last year, according to Studio Graphene’s latest Tech Tracker index.

The sharp fall in confidence reflects the ongoing impact of the Covid-19 pandemic, with more than half of companies surveyed saying they were very worried about the fallout from the health crisis.

More than a third felt their businesses were not well prepared to deal with the economic downturn, while 31 per cent had no contingency plans in place at all.

A separate report released today by Dealroom estimated that a third of European tech companies were “vulnerable” to the Covid-19 crisis.

The survey stated that roughly 6,000 businesses would struggle to survive the pandemic, including those in the lending, property tech and fashion tech sectors.

Firms in travel technology and mobility would be hardest hit, it added.

The Tech Tracker index revealed that increasing sales is now the biggest challenge facing tech startups. Sixty-one per cent cited this as an issue — up from 45 per cent in the final quarter of 2019.

Moreover, over two-thirds of respondents said they lacked confidence in the government’s ability to support the tech sector through the Covid-19 crisis.

Listen to our daily City View podcast as we chart the economic fallout and business impact of the coronavirus pandemic.

It comes despite the Treasury earlier this week unveiling a new £500m support package that will offer convertible loans to high-growth startups.

Ritam Gandhi, founder and director of Studio Graphene, said that while coronavirus was the biggest challenge many businesses have ever faced, startups were well-placed to weather the storm.

“They are nimble, agile and able to respond to the challenges that arise on a day-by-day basis,” he said.

“What’s more, demand for technology is higher than ever – consumers and businesses need innovative solutions to the problems they are currently facing. So, there are opportunities for those who can pivot and keep pushing forward.”

While the crisis has rattled confidence, the majority of tech startups still plan to hire more staff and hope to raise further investment this year. Just under half plan to expand into new markets.

Read more: London fintech firm Previse secures $11m in funding round

Gandhi called on chancellor Rishi Sunak to continue to assess support for businesses amid a lack of trust in the government’s ability to prop up the tech sector.

“We must all hope that the government can prove the sceptics wrong,” he added.

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