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British businesses slash IT budgets

U.K. companies have downgraded their technology-spending plans for 2007, but huge differences exist between sectors.

British companies are downgrading their IT spending plans for 2007, largely driven by cautious forecasts for the global economy.

A survey released on Friday found that large businesses worldwide expect to spend an average of just 2.8 percent more on IT next year. This is a significant drop on predictions made earlier this year, when the average increase was forecast to be 6 percent.

In the United Kingdom, companies are planning even less of an increase--just 0.9 percent.

But there are huge differences between vertical sectors. Media, pharmaceutical and health care companies are planning to increase their spending on IT next year by an average of 6.9 percent, 6.4 percent and 5.6 percent, respectively, while manufacturers of consumer products are planning to cut their spending by 5.6 percent.

"A number of factors have combined to force enterprises to lower their IT-spending forecasts from the first half of 2006," said Jed Rubin, a director at Gartner, which carried out the research.

Rubin said businesses had spent more in the past year on what he called "run the business" costs than they had planned. This would lead to IT departments focusing on "managing business demand better and improving operations internally," Rubin said.

Health care companies are spending more because of aging populations, while the penetration of IT in media companies had grown tremendously due to their complex models for delivering content.

Rubin also identified already high levels of IT expenditure in the finance sector, at 12 percent of total operational costs.

Spending will vary widely according to technology, Gartner reported. Growth areas next year are expected to be wireless services, Web services, network security and storage. Areas at the foot of companies' spending agendas include proprietary Unix, mainframes and voice services.

Insurance, media and finance companies are the most likely to run large IT departments, with an average of at least 1 in 10 employees working in IT. Gartner said corporate IT jobs were divided as follows: 22 percent for data centers; 20 percent for application development; 13 percent for desktops; 10 percent for data networks; 7 percent for voice; 7 percent for finance, management and administration; and 5 percent for help desks.

Richard Thurston of ZDNet UK reported from London.