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Public sector IT and communications spend down 4% last year

Public sector spending on IT and communications was down in 2021, but some departments bucked the trend with major investments

The UK public sector spent 4% less on IT and communications last year, but the top three spenders bucked the trend by spending over £500m more in 2021.

According to figures from Tussell, the UK public sector spent £10.2bn on IT and communications in 2021, compared with £10.63bn the previous year.

The analysis of the spending of 880 public sector organisations, including central government, local government, health services, education and transport, found that HM Revenue and Customs was again the biggest spender, investing £1.1bn – a 30% increase on the previous year.

The Department of Work and Pensions (DWP) and the Department of Health and Social Care (DHSC) also increased their spending. The DWP spent £694m last year, a 19% rise on the previous 12 months, while the DHSC more than doubled its spending from £286m to £588m.

A significant increase in spending was also recorded by the Department for Education (DfE), which spent £365m, a 208% increase on the previous year. This followed a year of staff and pupils being forced to work from home during lockdowns.

Going in the opposite direction was the Ministry of Justice, which saw a 94% fall in investment in IT and communications products and services. Its spending dropped from £289m in 2020 to just £16m last year.

Despite a reduction, Capita Business Services was the biggest supplier of IT and communications to the public sector, with £620m sales in 2021 compared with £839m in 2020. Atos IT services was second with £523m in sales, a fall of 12% on the previous year. Capgemini, in fourth spot, increased its sales to the UK public sector by 11% to £480m, while Fujitsu saw its sales in the sector fall by 17% to £317m.

Tussell also revealed that 3,683 IT and communications contracts in the public sector, worth £3.8bn, are up for renewal this year. More than half of those contracts, in terms of volume, are in central government (54%) and 20% in local government. By value, central government contracts account for 78%, with local government making up 6%.

Mark Lewis, a senior consultant at Macfarlanes who specialises in IT outsourcing contracts, said this year will see growth. “By all accounts, the UK public sector IT outsourcing market will grow in 2022. Because of the continuing impact of the pandemic and planning for future disruption as a result of that impact, there will be an even greater acceleration in the adoption of digitisation, especially in citizen- and NHS patient self-help technologies.”

He said the UK public sector will face major challenges this year on onwards including being subjected to the same pressures as all other IT outsourcing and digitisation since 2019, driven mainly by the great IT talent shortage.

He added. “There are two areas that I expect to feature heavily in 2022 in this market, but to varying degrees. The first, which is and will be an even greater concern than in previous years, is UK public sector cybersecurity and resilience, especially with a growing threat to critical national infrastructure and services. The second, following COP26 and the rise of the ESG movement, will be an attempt to make public sector IT and supply chains greener. I think the greening of IT will present very significant challenges, especially given the other pressures on the IT and IT-enabled services markets. Let’s see how central and local government balance those pressures.”

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