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Lack of IT investment could prolong recession

Kathleen Hall

The UK economy could continue to suffer as businesses are failing to invest in technology and innovation.

IT finance provider Syscap analysed figures from the Office for National Statistics to find that, in the first quarter of 2012, investment in IT fell by 10%, from £3.91bn to £3.52bn.

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The research follows a separate report from investment and research body Nesta, which found investment in innovation by British businesses had plummeted £24bn since the recession began.

Geoff Mulgan, Nesta's CEO, said: "Everyone agrees that innovation is the only route to long term growth. The concern is that today's report and Investment Index show that investment in the future didn't just fall during the immediate aftermath of the financial crisis, but also continued falling as the economy appeared to stabilise.

"Other countries are making investment in innovation a top priority and the UK cannot afford not to do the same.  

"Our data shows that British business prioritised cash and concrete over investment in future technologies and services, a potentially disastrous decision that now needs to be put right."

Syscap’s CEO Philip White, said maintaining a modern IT infrastructure is a vital factor in national productivity. 

“This trend in underinvestment in IT is not seen, for example, in Germany- quite the opposite - they have seen a strong increase in IT investment over the past three years," said White.

White said banks’ reluctance to lend money is to blame for IT underinvestment. He said government policy should be more supportive of investment in IT.

"In April, the Annual Investment Allowance, which provided 100% tax relief on IT investments up to £100,000, was reduced to just £25,000," he said.

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


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