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Blighty will be BIGGER and BETTER than Germany, confirm beancounters

In the tech sector, anyway...

Britain's teamsters may not be setting the sporting stage alight this summer but the local tech economy is heating up as it sprints to Euro glory.

Figures from Chancellor George Osborne late last week showed that overall UK economic output is some two per cent larger than pre-financial crisis levels in 2008, after rising 0.8 per cent in calendar Q2.

This improving sentiment is feeding into more demand for software and services, with desktop hardware helping out too. As business confidence begins to return, UK spending is growing at twice the Western Europe average.

According to Forrester Reseach, tech purchases in Blighty will reach €94bn in 2014, up 4.9 per cent, leapfrogging Germany (growth of 1.2 per cent to €92bn) as the biggest spender in the region.

"With the UK economy on the upswing for now, UK businesses will be opening their wallets for new technology after three years of restraint," said analyst Andrew Bartels.

He added multiple verticals are in recovery mode: the financial services sector is upping its spend on risk and compliance, while manufacturing, utilities, and transportation are expanding again and moving to counter "low productivity" that represents the "biggest cloud" in the UK economy.

Consumer confidence and retail spending are rising, though the Forrester beancounter warned that an interest rate rise could derail the recovery by hitting households' discretionary spending. In such an event, '"all bets are off".

Each major segment is forecast to grow: six per cent in software to £18bn; five per cent in consulting services to £18bn; five per cent in PCs and peripherals to £12bn; seven per cent in outsourcing with hardware maintenance to £13bn; five per cent in comms kit to £6bn; and telecoms services up two per cent to £12m.

Increased optimism in the UK economy has prompted the good folk at analyst TechMarketView to raise forecasts for software and IT services (SITS) spending in 2014 from 1.3 per cent growth to two per cent, totalling £43.46bn.

"This may sound like a small change, but in absolute terms it represents an additional £850m of net new market spend in 2014," said Anthony Miller, "fully 50 per cent higher than we expected this time last year".

TMV had expected UK SITS to decline in real terms (eliminating the effects of inflation) until 2016 and subsequently be flat until the end of the decade. Faster headline growth and lower inflation forecasts shaped the 2014 update, it said.

Despite this, IT cost containment will remain the "watchword" in the private and public sectors, and the cash for new projects may "primarily be funded" for savings eked out from daily operations and support, the analyst said. ®

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