IT investment dips as banks fail to give credit

Investment in the IT sector has dropped with the failure of banks to give credit cited by Syscap as as one of the main reasons for the problems

A double dip has hit IT investment with the level of funds being spent in the tech sector dropping back this year as the economic conditions bite and credit continues to be hard to come by.

Channel finance specialist Syscap has revealed that in the first quarter of 2012 IT investment fell by 10% ro £3.52bn.

That doesn't compare well to the economy as a whole, which has seen business investment continue to climb by 3.45% to £33.32bn in the same period.

One of the main reasons for the specific problems in the IT market were down to the ongoing problems that firms in that sector have had getting credit from banks.

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

The banks are often more comfortable providing finance against more traditional assets and struggle to understand the IT market.

But White warned that the consequences for UK plc could be fairly profound if the lack of investment in IT continued.

"Maintaining a modern IT infrastructure is a vital factor in national productivity. This trend in under investment 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," he said.

"Interest rates for business loans remain high, and banks are often not the answer for firms looking for IT finance," added White suggesting that specialist finance firms had a role to play providing an alternative source of funds.

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