Double dip recession stifles IT investment in the UK

IT investments in the UK fell by 10 percent in the first quarter of 2012, according to the Office for National Statistics, despite an increase in overall business investment of 3.45 percent in the same period.

The figures show that investment in IT fell from £3.9 billion to £3.5 billion, which contrasts with the overall business investment increase from £32.2 billion to £33.3 billion, in Q1 2012.

Syscap, an independent IT finance provider, believes that the drastic decline in investment is due to businesses struggling to secure funding for IT from banks.

“Banks are traditionally uncomfortable with lending to businesses so that they can invest in IT equipment,” said Philip White, chief executive of Syscap.

“Often the cause of this is that banks lack the specialist knowledge to assess the long-term value of IT equipment, and feel uneasy about providing loans against an asset they find hard to price.”

He added: “However, banks tend not to be so cautious when providing finance against more traditional assets, such as commercial vehicles or plant and machinery.”

White argued that the decline in IT investment may make the UK less competitive on an international scale, as countries like Germany, for example, have seen a strong increase in IT investment over the past three years.

He also said that government policy is aiding the declining trend, rather than trying to reverse it.

“In April, the Annual Investment Allowance, which provided 100 percent tax relief on IT investments up to £100,000, was reduced to just £25,000,” said White.

“From our point of view, the scrapping of the tax incentive is very unfortunately timed. More needs to be done to encourage UK businesses to invest more in IT, not less.”