Brexit uncertainty could shrink UK IT market by 15 per cent next year - Canalys

IT spending outlook for 2017 even worse than 2016, according to analyst

Canalys has slashed its 2016 UK IT spending forecast by 10 per cent - and has warned 2017 could be even worse - due to uncertainties over Brexit.

The analyst previously predicted that UK IT spending would hit $90bn to $100bn this year but now expects this to fall by 10 per cent based on public sector and businesses cutting expenditure to reduce risk.

"The outlook for 2017 could be even worse, with up to a 15 per cent decline as IT budgets are set lower on the prediction of a tough year ahead and ongoing uncertainty," said Canalys chief analyst Matthew Ball.

Canalys warned last week that the Brexit-induced crash in Sterling would lead to vendor price hikes.

Sterling's value could "feasibly drop below the $1.20 mark if confidence deteriorates further and capital continues to flow to safer assets", the analyst added in its latest update.

"This will be a key issue for the IT sector, as technology prices rise due to higher import costs,' said Ball.

"In the short term, contracts will have to be renegotiated and proposals requoted due to the strong shift in value. Any new activity will be suspended until rates stabilise. International businesses will have to assess their Sterling cash position and level of exposure, as their assets will be worth less if not adequately hedged against."

IDC also warned in April that a Leave vote would cause UK IT spending to shrink, but said the overall impact of a Brexit on the industry would be only "mildly negative".

Almost two-thirds of techies questioned in a recent poll felt leaving the EU would be bad for the local tech sector. CRN's own poll (see bottom) points to more evenly spread sentiment.

On the plus side, pressure eased on the UK's finanical markets this morning, with the pound and FTSE 100 both showing signs of recovery, the BBC reports.

But looking to future, Canalys research analyst Claudio Stahnke predicted uncertainty for months to come.

"Trade disruption, political instability, recession, stagflation, talent pool reduction and the collapse of the EU are all potential outcomes that need consideration," he said.

"The UK is taking a big gamble on its future. The unprecedented nature of the move to leave makes the true extent of the outcome an unknown. Though there are a number of different scenarios that could play out, what is certain is that we are only at the very start of defining the UK's new relationship with the EU."