Spending growth is at lowest level since 1993

Growth in UK IT spending is at its lowest level since 1993, according to the latest Computer Weekly/Kew Associates IT Spending...

Growth in UK IT spending is at its lowest level since 1993, according to the latest Computer Weekly/Kew Associates IT Spending Survey.

The survey of 2,500 corporate IT users found that year-on-year growth in IT spend has dropped to 6% for the final quarter of the year. It is down from a growth rate of 11% at the beginning of the year and is only half of the growth rate of l999/2000.

Total UK IT spend for 2001 was £60.3bn, up from £55.7bn the previous year. But that is a increase of less than £5bn, compared with the £6bn increase in spending between l999 and 2000 - nearly 12% growth.

Users should not expect any recovery in growth rates until 2003, the survey forecast. Next year's growth rate will be even lower than this year's annual average of 8.4%. Spending is set to rise by £4.2bn to £64.5bn in 2002 - a 6.9% growth in spending throughout the year.

Companies will not see significant increases in IT spending growth until 2003, when spending is predicted to rise by 9.8% to £70.8bn.

But although the growth rate of IT spend has been falling steadily all year, an interim, Web-based survey of 1,000 users carried out in September revealed that the terrorist attacks in the US have not exacerbated the slowdown.

"It had no material effect on IT spending," said Chris Wicka, managing director of Kew Associates. "The 7.2% IT growth at the end of September straddled Q3 and Q4 growths of 8.1% and 6.0% respectively."

However, IT spending growth rates are not evenly distributed. The November figures show that major companies have taken a significantly bigger hit on their budgets than small to medium-sized enterprises.

Whereas companies with more than 500 employees have seen IT spending growth drop to 4%, companies employing fewer than 500 staff have seen IT spending increases of 11% this quarter.

There are also spending differences in different parts of the economy. Although IT spending in the services sectors is more than three times that of spending in the production sector - £37.8bn and £12.5bn, respectively - spending growth rates will fall from the current 8.8% this year to 5.8% in 2002. In production industries growth rates will only fall from the current 7.4% to 6.0% next year.

In the last quarter, hardware spend increased by 2.5%, software spend by 4.9% and services spend by 10.1%. During 2001, hardware spend increased by 2.2% (up from £14.3bn in 2000 to £14.6bn in 2001), software spend was up by 8.9% (£7.8bn to £8.5bn) and services spend grew by 11.9% (£14.6bn to £16.3bn).

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