Small companies are the driving force behind a large increase in spending on business IT equipment over the last quarter, a new report has revealed.

The research, conducted by Computer Weekly and Kew Associates, found that IT spending rose by 5.2 per cent in the last three months of 2003, up from 3.9 per cent in the previous quarter.

The report attributs the rise in spending, the best growth in 18 months to increased optimism over the economy.

Firms in the services sector experienced the largest rise in IT spending, with a increase of 5.5 per cent in new equipment, while the production industry, buoyed by the recovery in the manufacturing sector, saw an increase of 3.3 per cent.

The increase in IT activity suggests that the downturn in the industry, the worst of its kind in 10 years, could be nearing an end.

Kris Wicka, director at Kew Associates, said: “Small firms are still playing catch-up with larger firms when it comes to IT expenditure, so the difference in spending may continue in the future.”