Overall affect of Government Cuts on IT spending

PricewaterhouseCoopers has predicted that IT suppliers in the private sector are set to lose a total of £3.7 billion in revenue a year as a direct result of the government’s impending spending review.

More specifically, computer service suppliers are expected to lose £2 billion in revenue, while the machinery and computers sector will lose £1.7 billion a year by 2014/15, as a knock-on effect of cuts expected to be made in the public sector.

Tola Sargeant, research director at analysts TechMarketView, said that PwC’s predictions were broadly in line with its own forecasts. TechMarketView said that its draft forecast was that private sector IT software and service suppliers alone would lose £1.3 billion over 2010 and 2011.

“The numbers we have are for software and IT services, and it’s hard to say whether their [PwC’s] definition is broader, but we are an agreement that there will be a significant impact [from the spending review] on the private sector market,” said Sargeant.

She added that TechMarketView expects the bulk of the cuts in the public sector to be in central government, more than local government.

While she expects health IT suppliers to also suffer significantly, Sargeant said that this would be a consequence of delays over the remainder of the National Programme rather than major cuts. In contrast, education “still has some money being filtered through to IT suppliers”.

The figures were produced as part of PwC’s ‘Sectoral and regional impact of the fiscal squeeze’ report, in which PwC said that the private sector gross output could be reduced by around £46 billion per year by 2014/15 due to the impact on suppliers to the public sector.

In addition, the consultants predicted that almost half a million private sector jobs could be PwC also believes that in contrast to many sectors, the outsourcing sector will thrive.

“A sector likely to see growth opportunities from spending cuts is outsourcing, and not only in back office services. Government and public sector organisations will look to reduce their non-core and fixed cost operations by increasing the use of private and voluntary sector organisations for the delivery of front-line services.

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