Gartner cuts tech spending forecast

Sovereign debt lowers outlook

By John Oates, 2nd July 2010

Analyst house Gartner has lowered its prediction for growth in the European technology market, blaming sovereign debt which is likely to push down public sector spending.

Gartner was expecting growth of 5.3 per cent for the year - from $3.225 trillion to $3.350 trillion worldwide. It is now predicting more modest growth of 3.9 per cent thanks to cuts in public spending and the fall in the value of the Euro against the dollar.

Richard Gordon, VP of research at Gartner, said European countries' debt was having an impact on IT spending. He said the fall in the value of the Euro in the first half of the year was expected to continue, and to continue to push down spending on dollar-priced technology.

He expects hardware sales to remain robust - 2009 saw growth of 9.1 per cent. Two-thirds of this growth came from PCs.

But Gordon has also put himself at odds with UK government predictions that private sector growth will offset public sector cuts.

Figures from the Treasury predicted that 1.3 million jobs would go as a result of the Budget, but this would be offset by the private sector creating 2.5 million jobs over the next five years. But several observers have called on the Office for Budget Responsibility to justify these figures, which outstrip any previous economic recovery.

Gordon said: "Longer-term, public-sector spending will be curtailed in Europe as governments struggle to bring budget deficits under control during the next five years and to reduce debt during the next 10 years. Private-sector economic activity will also likely be hindered because of the direct impact of austerity measures on key government suppliers and the indirect impact caused by the 'ripple effect'."