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In the CEBR's Quarterly Business Forecast report, to be released shortly, research found IT spending was down 17.1 per cent by the fourth quarter of 2001. However, it predicted a rise in spending of 6.4 per cent by the end of 2002.
The figures showed UK IT spending bottomed out in the third quarter of 2001 and stayed at the same level until the end of the year. It has since begun to recover in the first quarter of 2002.
CEBR estimates that spending will be up by 2.5 per cent this year on 2001.
In a review of the US market, CEBR found that IT spending had bottomed out in 2002 after a 16.7 per cent drop from the fourth quarter of 2000 to the same period in 2001. It predicted a slower rebound than usual 'because of tough financial conditions affecting many of the technology companies (who themselves are major technology purchasers), despite fresh tax incentives approved by US Congress last week.'
The consultancy estimated that US technology spending would increase by 12.4 on fourth quarter figures from 2001, by the end of 2002.
Douglas McWilliams, Managing Director of the CEBR, said: "The revival in technology spending reflects the very different underlying economics in this area from other parts of the economy. In both the UK and the US the fall in spending during 2001 reflected reduced access to finance as a result of falling share prices, which caused companies to put projects on hold. But because the pace of technological innovation in this sector is so rapid, investments made as little as 24 months ago can already be obsolete. In addition, as the world economy revives, businesses need new equipment. In the days when investment was mainly in heavy plant and machinery and when the pace of technological improvement was glacial, excess capacity at the end of an investment upswing could overhang the economy for years, causing investment to remain in the doldrums. By contrast, information technology investment is obsolete so quickly that it is difficult for spending in the area to stay down for long provided that the economy keeps growing. If you want to stay in business and be competitive it is difficult to avoid IT investment."
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Richard Powell, Shout99
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