Public sector IT spending will be hit hard after election

Central government will be among the hardest hit

Public sector IT spending will grow 2.9 per cent by 2013 if Labour retain power and 0.8 per cent if the Conservatives win the election and enact cuts more swiftly, according to a report by analyst TechMarketView.

The report, UK Public Sector SITS Market Trends & Forecasts 2010, says that central government, the police and defence sectors will be hardest hit by cuts as budgets are less protected than other sectors.

Health is forecast to be the strongest growth sector in both scenarios, followed by education and local government. The NHS and schools which will still require some investment in IT even if large programmes such as the National Programme for IT in the NHS (NPfIT) and Building Schools for the Future (BSF) are scaled back, the report says.

“With a change of government expected later this year, IT suppliers to the public sector need to be prepared to adapt to new market conditions. The public sector has been the lifebuoy of UK IT for quite some time, so such a significant cut will have far-reaching consequences,” says Tola Sargeant, research director at TechMarketView.

The report says 2011/12 will begin to see the effect of more significant budget cuts and an increase in outsourcing that would likely be more pronounced under the Conservatives. The outsourcing sector is expected to be responsible for most of the growth in public sector IT spending over the next few years.

Shared services are also set for continued growth across the public sector, driven by the need to improve efficiency and reduce costs.

And the gradual trend towards greater use of offshore resources to deliver software and IT services to UK public sector organisations will continue as those providers become more mainstream and pressure to make cuts grows.

The report also says big, national-sale IT projects will be much less common after the election, with smaller-scale, decentralised projects more likely. The Conservatives have already proposed a ₤100m cap on all public sector IT projects.