Boston, MA -- (ReleaseWire) -- 01/24/2013 -- UK IT spending is expected to reach US$83.6bn in 2012, down 1%, with BMI downwardly revising its forecast, following the UK's return to recession in early H112. UK PC sales drifted back into negative growth territory in Q212, after a single quarter of positive growth in Q112. The overall outlook for UK IT spending in 2012 is one of negative growth, with the UK unable to remain immune to problems affecting other major European markets. The UK IT services market remains overshadowed by the impact of government cuts in IT spending and a moratorium on projects with a value of more than GBP100mn.
Headline Expenditure Projections
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Computer Hardware Sales: US$19.4bn in 2011 to US$18.8bn in 2012, -4% in US dollar terms. Downwardly revised owing to analyst modification after the PC market reported negative growth in Q212.
Software Sales: US$11.8bn in 2011 to US$12.1bn in 2012, +2% in US dollar terms. Downwardly revised owing to analyst modification, but software still comprises around 70% of cloud spending.
IT Services Sales: US$53.3bn in 2011 to US$52.7bn in 2012, 11% in US dollar terms. Downwardly revised owing to analyst modification with price deflation and an environment of fiscal retrenchment meaning difficult trading conditions for vendors.
Risk/Reward Ratings (RRR): The UK's score was 82.9 out of 100.0. The UK remains first in our latest Europe IT RRR table, still ahead of Germany and Sweden, and despite the overall disappointing performance of its PC market in H112.
Key Trends & Developments
- A major factor likely to restrain demand in 2012 is the government's tough austerity programme, which has targeted an average of 19% cuts across departments over a four-year period through to 2015. In March 2011, the government claimed it had achieved savings of GBP1bn, although detailed figures were not available. Meanwhile, the GBP12.7bn National IT Programme for Health (NPfIT) was finally scrapped in 2011.
- The UK cloud market remains small, at an estimated GBP1bn in 2012, but BMI forecasts it could account for 10% of total UK IT spending by 2016. The government's efficiency drive may create opportunities in areas such as cloud computing and offshoring, where pilots have been launched. While the centralised health IT provider model has been cancelled, individual components of the plan will still be implemented. The government has also announced plans to liberalise its procurement process and increase the use of open-source software in government.
- Private sector budgets remain tight and many businesses are still reluctant to commit to new investment that requires large commitments of time and money. Credit availability is another constraint on activity. However, in H112, there were indications that delays in upgrades were fuelling more spending on maintenance and warranty services. There is also considerable pentup demand for ERP solutions.
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