Thu, 5th March 2009

UK IT spending slowdown to hit retail sector the hardest

Investment in software and IT services (SITS) will fall in the UK in 2009, and the decline will be steepest in the retail sector.

Software and IT services spending will suffer the most in the UK retail sector in 2009, according to figures just published by Pierre Audoin Consultants (PAC) in partnership with TechMarketView (TMV), the new venture of leading sector analysts Richard Holway and Anthony Miller.

While overall investment in software and IT services (SITS) is forecast to fall by 1% in 2009, PAC and TMV believe that spending in the retail sector will decline by 5.9% this year to reach a total of £2.77bn.

In contrast, the most robust UK market for SITS will be the public sector, where local government outsourcing programs and national security initiatives will help to drive a spending increase of 3.7% this year. Of the nine key vertical sectors tracked by PAC in the UK, only three are expected to experience a rise in SITS investment in 2009. Some large UK retailers, such as Marks & Spencer and Morrisons, are pushing ahead with essential IT modernisation programs, and there is a renewed interest in outsourcing from retail groups such as Phones4U as they look to reduce their operating costs. However, PAC expects UK retailers to slash or freeze their budgets for new applications software and IT project services, as they shelve expansion plans and focus on cost control.

Nick Mayes, Senior Consultant at PAC UK, said: "Dwindling consumer confidence coupled with the crisis in the financial markets has seen the disappearance of some of the country's largest and best-known retail groups, which has led PAC to forecast that this sector will be one of the toughest for UK software and IT services players in the medium term."