IT to lead UK out of recession

Research from CEBR reveals 2011 is going to be another tough year, but the IT sector will be the star performer

Douglas McWilliams: The IT sector will outperform the economy as a whole

The need for businesses to refresh ageing IT systems is going to drag the UK economy out of recession, a leading economist has predicted.

Speaking to delegates yesterday at the CRN Channel Conference in Reading, Professor Douglas McWilliams, chief executive of the CEBR, painted a bleak picture of the global economy as it stands with low interest rates, the future of the euro under threat and public spending in the UK at the highest in Europe at 53.4 per cent of GDP.

“We think 2011 will be weaker than 2010. The double dip is below 50 per cent probability, but is also one of the reasons why we suggested the government should delay the VAT rise.”

He added that despite the gloom, UK house prices had held up because our " awful" planning restrictions had only allowed for 60,000 to 70,000 new houses a year to be built instead of the 200,000 actually needed to cope with demand, causing a shortage. Countries such as Spain and the US, which have an excess of housing are seeing the opposite problem with prices bottoming.

“The only bright spots are Central and Eastern Europe,” he said. “Italy lost 40 per cent of its export market share and France lost 20 per cent. Ireland and Greece have serious problems and the only real option is to default on the euro and devalue. You could argue that the euro cannot survive.”

He said even the super economies such as Japan were facing problems due to its aging population.

“In Japan, the population aged 15-64 will drop by a quarter in the next 15 years. It has already raised the retirement age to 70 and will maybe look at raising it to 75. We have a much more cosmopolitan population due to immigration, which has helped to replace the older population, but Japan has not done the same,” he said.

However, on a brighter note for the IT sector the refresh cycle will keep the economy moving.

“IT investment is going to drive recovery. Kit has to be replaced relatively frequently because technology moves forward so fast and requirements change. Spend on IT will come back faster than most other business spend,” he said. “2011 is going to be a tough year, but you are in an industry that will outperform the economy as a whole.”