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Study shows U.K. headed for upturn

The country's technology market is starting to recover, according to new research from the London-based Centre for Economic and Business Research.

The United Kingdom's technology market is starting to recover, according to new research from the London-based Centre for Economic and Business Research.

The driving force behind this upturn is thought to be the need for companies to replace obsolete equipment, after many postponed spending on information-technology infrastructure in 2001.

The CEBR has calculated that the decline in spending on technology products in Britain hit its lowest point in the third quarter of 2001, and stayed at that level through the fourth quarter. Recovery began in the first three months of 2002, and the CEBR believes that overall spending on technology will be 2.5 percent higher this year than last year--with fourth-quarter 2002 spending predicted to be 6.4 percent higher than the year-ago quarter.

The CEBR believes that the American IT sector is also through the worst of the recession, and is predicting that recovery will begin in the first quarter of 2002.

U.S. technology spending was down 16.7 percent in the last three months of last year compared to the fourth quarter 2000, and the CEBR warns that the recovery will be slow--partly because many technology companies will find it hard to spend much on new equipment.

In previous economic downturns, companies have been able to put off spending on infrastructure for many years. This has often made it hard for manufacturers to stage a recovery, as firms were able to make do with their older machinery. Such long-term postponements are not possible where IT equipment is concerned.

"Information-technology investment is obsolete so quickly that it is difficult for spending in the area to stay down for long provided that the economy keeps growing. If you want to stay in business and be competitive, it is difficult to avoid IT investment," said Douglas McWilliams of the CEBR.

Graeme Wearden reported from London.