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IT spending to stay steady in U.K.

A recent study shows that Britain's largest companies expect investments in new technology to give a major boost to their profitability.

Few of Britain's largest companies will cut their information technology spending in 2002, according to recent research, which showed that companies expect investments in new technology to give a major boost to their profitability.

A survey carried out by software developer NIIT Europe found that 38 percent of IT managers at large companies who responded to the survey expect their IT spending to be greater this year than last year. A further 33 percent predicted that their IT spending levels would remain flat.

Many tech companies have been warning that recovery could be several months away, so an increase in corporate IT spending could provide a valuable boost to the tech sector.

One possible reason for such an increase: Companies believe spending money on new technology will boost their profitability. Of the 200 IT managers interviewed, 69 percent agreed that maximizing return on IT investment is an important part of their IT strategy, with 42 percent saying it was the most important issue.

"In the current economic climate, businesses have to take a hard look at existing cost structures and make radical changes that will provide an impetus to profitability and growth," said David West, vice president of NIIT Europe. "In today's technology-based business world, IT now plays a major role in assisting with profitability, both on the revenue and cost side of the equation."

The IT managers identified e-business infrastructure, Web services, application integration, customer relationship management, and application development as areas likely to see high levels of investment this year. NIIT Europe said that e-business infrastructure is particularly important for larger companies.

The London-based Centre for Economic and Business Research claimed last month that Britain's technology market is starting to recover, driven by the need for companies to replace obsolete equipment, after many postponed spending on IT infrastructure in 2001.

Graeme Wearden reported from London.