UK to overtake Germany in IT spending boom

Britain is on track to become the dominant market for information and communications technology (ICT) in Europe this year, thanks in part to public-sector spending and the outsourcing boom.

Figures released by the European Information Technology Observatory (EITO) show that UK spending on IT and telecoms services in 2004 will exceed that of many other Western European countries.

The overall Western European market is expected to grow by 3.1 per cent, compared to only 0.6 per cent in 2003, with the UK expected to be particularly buoyant with a growth rate of 3.2 per cent. This means the UK's spending will be worth £124.7bn which will be just enough to overtake Germany, currently the largest ICT economy in Europe.

The UK's ICT sector has been gaining on that of Germany - which is a larger economy overall - for some time. However, previous forecasts suggested that Britain wouldn't overhaul its Teutonic rival until 2005.

According to Intellect, the high-tech trade association, the UK's projected growth is partly due to a general economic recovery.

"Forty years ago, IT was such as small sector that it was largely insulated from the economic conditions of the time," Charles Ward, marketing and services director at Intellect, said.

"Today, though, IT makes up 30 per cent of all investment, so it's significant enough to be vulnerable to the peaks and troughs of the economic cycle," Ward explained.

Intellect says that the fact that UK companies are spending more on outsourcing than their European rivals will help to boost the British ICT market.

The billions of pounds being spent by the British government on e-government projects, such as broadband rollout to the public sector and the upgrade of the National Health Service's IT systems, are also a contributing factor.

Ward also says that many British firms will be upgrading their IT equipment during the coming months, having reined in their budgets in the past.

"There's a backlog of IT spending, following the caution of recent years," he said.

Graeme Wearden writes for ZDNet UK