Analysts ‘especially nervous’ on weak UK IT spending

This year will see a two percent decline in UK software and services spending, in “real terms”, analysts have warned.

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This year will see a two percent decline in UK software and services spending, in “real terms”, analysts have warned.

TechMarketView compared the growth against GDP. It also predicted this entire decade would see the spending continue to trail slightly behind GDP increases.

Richard Holway, chairman at TechMarketView, and the company's managing partner Anthony Miller, said there was “very little” new demand for IT.

They said they were “especially nervous” about growth in 2011, because customers were talking about contracts but not signing them. And many planned projects were simply ones that had “previously been delayed, cancelled or curtailed”.

A “double dip” could take place next year, as those projects have “finally flushed through the pipeline”, Holway and Miller warned in the latest MarketViews newsletter.

The maturity of the UK software and services industry, combined with lowering prices and the “irreversible expectation” among customers of having “more for less”, were other factors reducing the amount of money being spent.

Some £39.6 billion will be spent by UK firms this year on software and IT services, analysts PAC calculated, a £300 million growth on 2009 but a significantly smaller change than GDP. This spending will be alongside £15.5 billion on IT personnel and £11.5 billion on hardware, the firm calculated.

The utilities, transport, telecoms, insurance and public sectors would all increase to some degree this year their spending on core IT services including maintenance, TMV and PAC said. But the retail, manufacturing and services sectors would show a decline.

In the next four years, as businesses continue to focus on cutting costs, outsourcing would be the strongest growth area for services and software, TMV and PAC said. They predicted a 4.9 percent growth in this area, compared to a 4.3 percent spending increase on software "tools", 3.5 percent on application software, 2.1 percent on project services and 1.6 percent on system infrastructure software.

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