Double-dip recession short lived as technology and IT business confidence soars

16 May 2012 – 

Business confidence in IT and technology is higher than in any other industry in Q2 2012, driven by increased expectations for domestic sales, according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM). Despite a strong rebound in the Confidence Index, BCM supports the view that the UK’s economy will continue to ‘zig-zag’ over the next 12 months, with economic recovery still very fragile. 

Key findings for Q2 2012 show:-

  • The BCM Confidence Index for the IT and communications sector stands at +26.5., up from 4.7 in Q1 2012 and the highest level since the second quarter of 2011 – this is in comparison with +12.0 overall up from -9.3
  •  The IT and communications sector is one of just two industries that has remained consistently positive on the Index since Q3 2009, the other sector is energy, water and mining
  • Businesses in the sector expect domestic sales to grow by 6.3% over the next twelve months, compared with 3.2% growth achieved in the last quarter
  • The strong improvement in confidence across the board suggests the current recession is likely to be short-lived, with quarter-on-quarter growth of 0.6% forecast for the second quarter of 2012
  • Technology and IT businesses expect capital investment to grow by2% over the next 12 months.
  • Technology and IT businesses expect to outperform the national average over the next 12 months in terms of growth in turnover (+7.3% vs 4.6%), gross profits (+7.4% vs 4.3%) and sales volumes (+7.5% vs 4.4%)

Wendy Hart, Head of Technology at Grant Thornton, said: "Shifting business models which look to drive cost savings for customers in the long term, but lead to spend in the short term are driving investment in technology. Examples of this include moving to a cloud based service, software as a service and infrastructure as a service. At the same time, businesses supplying the consumer market are seeing consistently high appetites for new technology, devices and applications which in turn drives sales.

"When the downturn first hit in 2008-9 IT budgets were frozen or heavily restricted. The speed of change in the technology since that period means that many business have no choice but to restart or continue investment. Because there is also a cost reduction angle to many technology sales there is also a short term spend/long term saving argument which is a useful one in the current market.

"Despite this, export expectations have fallen slightly in the last quarter, suggesting that Eurozone uncertainty continues to be an issue and this can only have increased since the survey was undertaken. R&D expectations have also slipped a little reflecting the on-going challenges of recruiting appropriately skilled staff, which is a recurring challenge for businesses in this sector."

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