Tories to wield IT budget axe faster than Labour?

Public sector - "lifebuoy of UK IT industry" - could spring a leak, post election

A Conservative victory in this year's General Election is likely to dramatically slow the growth in government IT spending than under a continued Labour administration, according to an analyst report.

The report, published by TechMarketView today, says under a Conservative government spending on software and IT services by the public sector will grow by an average of just 0.8 per cent each year from 2008 to 2013, compared to 2.9 per cent under a Labour government.

Even a 2.9 per cent growth rate would be below the healthy annual rise in public sector IT spending growth that took place from 2000 to 2010, with public sector spending expected to account for 28 per cent of the overall value of the IT market in the UK this year.

Central and local government departments are already preparing to make swingeing cuts to IT spend in order to meet Treasury targets to cut £3.2bn from the public sector's annual IT bill from 2013.

The report - UK Public Sector SITS Market Trends & Forecasts 2010 - predicts that from 2011, under either party, public sector IT spending will be growing at a slower rate than that of the private sector for the first time in a decade.

Public sector IT spend as a percentage of the overall value of the software and IT services market in the UK
(Image credit: TechMarketView)

TechMarketView director Richard Holway said the days of the mega IT contract are gone and that "every piece of new business, however small, will be the subject of intense competition" and warned that companies that have complacently relied on the public sector "are in for a rude shock".

Under a Conservative government, annual growth in IT spend will fall an average of 0.8 per cent each year in central government, 0.9 per cent in police forces and 0.2 per cent in the defence sector between 2008 and 2013. Annual IT spend on healthcare would grow the most, up 3.8 per cent on average each year between 2008 and 2013, the report says.

Growth is expected to dip from 2011, with spending on consulting, systems integration and software falling by the largest amount.

More IT services are expected to be outsourced by public sector bodies from 2012/13, particularly in local government.

TechMarketView research director Tola Sargeant said in a statement: "The public sector has been the lifebuoy of UK IT for quite some time, so such a significant cut will have far-reaching consequences."

But it's not all bad news - outsourcing, security and green IT are all areas that could see increased interest.