Analysts have been as one in downgrading their forecasts for UK IT market growth in the wake of the referendum, but not all are equally pessimistic, with one – Forrester – still forecasting growth for this year.
We caught up with some of the major analysts to dig deeper into how they feel Brexit will affect IT spending in the coming months and what positives – if any – the industry can take from the shock result of last week's plebiscite.
Kicking off with the least pessimistic of the major analysts, Forrester still believes the market will grow by one per cent in 2016, down from its previous projection of five per cent growth.
Its figures encompass purchases by UK businesses and public sector organisations of technology goods and services. They do not include consumer tech spending.
"The reason we've not slashed it so drastically is twofold," Forrester vice president Andrew Bartels told CRN. "Firstly, we're already halfway into 2016 and secondly, large sections of the UK tech market – for example the whole of the public sector, much of retail, much of professional services, utilities and telecoms – are not going to be affected by this at all, or only in minor ways."
Despite warnings from others that Brexit will be a "shot through the head" for public sector IT projects, Bartels (pictured) believes that public sector and utilities will be insulated from the fallout because they both count on steady revenues drawn from taxes and rates, respectively.
"We are really looking at an impact that will be concentrated in financial services and manufacturing, possibly among non-UK firms with operations in the UK," he said. "And even then, we're not looking at them cutting spending yet, but instead the likelihood of stopping new project investment until it becomes clear what the fallout will be."
Gartner, which includes both consumer and enterprise spend in its numbers, downgraded its 2016 UK IT spending forecast by between two and five per cent following the referendum. It now predicts the market will shrink by between 0.3 and 3.3 per cent.
"The only inelastic good we have is servers, where if the price goes up, spending goes up a little bit"
Gartner research vice president John Lovelock told CRN that the uncertainty created by Brexit would hit both discretionary spend among consumers and businesses and strategic projects.
"Leading up to the vote, a lot consumers and businesses put discretionary spending on things such as PCs, laptops and mobile on hold," he said. "We will see that continue through to the end of the year because the pound – which we expected to rebound after the vote – has not rebounded. We're going to see prices on many tech items going up, as foreign companies have to cover their costs, and that will cause a contraction in the market."
Most IT goods are elastic, meaning when prices go up, unit sales will go down, Lovelock explained, but he added that servers are the exception.
"The only inelastic good we have is servers, where if the price goes up, spending goes up a little bit," he said.
There are already signs that some organisations are deferring some strategic initiatives, Lovelock added.
"Even though they don't have any knowns, they now have exposures to risk. There are currency risks, data security risks, location risks and staff risks, and organisations have to evaluate where they are. And while that is happening, some strategic initiatives will probably be put on hold."
Canalys dropped a bombshell earlier this week by predicting that UK IT spending will now fall by as much as 10 per cent in 2016, to between $90bn and $100bn, off the back of last Thursday's result. It predicted that the market could decline by a further 15 per cent next year.
Canalys principal analyst Matthew Ball told CRN that previous hopes that the UK market would pick up in the second half were dashed by the Leave campaign's victory.
"My feeling is that nothing is going to change in the longer term and we'll still be in the single market and still have freedom of movement."
"We were expecting the second half of the year to be stronger, but now with all the uncertainty in the market it's wiped away that optimism," he said.
"Certainly, the immediate impact has been a lot of the distributors over the last few days have stopped shipping products and have frozen any quoting or activity until sterling stabilises. Even if things rebound a bit later in the year, a lot of projects will be delayed until there's a bit more leadership."
Ball struggled to identify many plus points for the channel.
"There don't seem to be that many obvious positives but for channel partners at the moment; it's an opportunity to work with the customers because all the businesses that are trading in Europe will be trying to work out what it means for them," he said.
"My feeling is that nothing is going to change in the longer term and we'll still be in the single market and still have freedom of movement. All this has served up is shorter-term uncertainty and disruption, mostly around sterling rates."
Jeremy Davies, co-founder of Context (pictured), which tracks distribution sales figures across Europe, said it may be weeks before the true impact of the Brexit vote is felt in the channel.
"We are rudderless at the moment and people are bound to be reining in spending until they know what the future holds," he said.
"But there's going to be a delayed action because stuff has already been committed to which will carry on being delivered. We probably won't see a tangible effect for a good couple of months, or even into the fourth quarter."
IDC, meanwhile, said it expects UK IT spending forecasts will likely be revised downwards by more than two per cent on a compound annual growth rate (CAGR) basis through to 2020.
"IT spending will likely shift, but the strategic transition towards the digital enterprise will remain, and in fact is likely to accelerate with a greater focus on cost optimisation and IT value to the organisation's bottom line."
This will have the effect of reinforcing the current trend towards cost optimisation, Thomas Meyer, group vice president of research at IDC, said.
"IT spending will likely shift, but the strategic transition towards the digital enterprise will remain, and in fact is likely to accelerate with a greater focus on cost optimisation and IT value to the organisation's bottom line," Meyer said.
IDC warned, however, that there is a "20 per cent probability" that IT forecasts will have to be slashed by five per cent through 2020 on a CAGR basis if the UK plebiscite sparks a contagion across the EU.
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