UK Banks To Up IT Spending 5.7% In 2005, Predicts IDC

UK Banks To Up IT Spending 5.7% In 2005, Predicts IDC
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At a time when all other major European economies are suffering, the UK is set to become the highest-spending financial services market in 2004.

According to IDC research, the overall IT spending of UK banks will grow at a rate of 5.7% in 2004, which is above the Western European banking industry average. IDC expects banks to concentrate IT spending on capital market operations and on all support activities generally referred to as “back-end.” Demand for IT services will remain the backbone of IT spending even though packaged software is expected to record the highest growth rates in the next five years. Hardware spending is expected to remain steady in 2004 in comparison to 2003, but in the long term, the value of spending in this sector will increase around 2%, with the networking area growing faster.

IT spending in the insurance sector is expected to rise at 4.2% CAGR from 2003-2008, with cost saving still imperative for insurance companies playing in the UK arena. In the short-term, IT spending growth in the life insurance sector will increase less than in the non-life sector.

Securities and investment firms account for more than 19% of U.K. financial services IT spending. Capital market recovery around Europe is assisting securities brokers’ and investment managers’ profitability and this will drive new IT investment in the near future.

“U.K. banking and insurance systems will provide a benchmark for competition in an integrated European arena to take advantage of the new opportunities generated by a new way of doing business,” says Mirko Corbetta, research analyst for European IT Opportunity: Financial Services Research. “The London Stock Exchange continues to attract the attention of asset managers and securities firms, despite strong competition from other European stock exchanges. As the level of complexity is high and IT is very important in banking, insurance, and securities trading systems, the UK market is surely an attractive place for IT vendors willing to target the financial services sector.”

In addition, the Financial Services Authority (FSA), as the watchdog for the entire industry, is committed to maintaining control without affecting competition. The strong role played by the FSA through the implementation of new rules and standards will also have an increasing effect on IT expense.

The study, Financial Institutions in the U.K.: IT Spending Trends and Forecasts, 2003-2008 (IDC #PF13L, October 2004), aims to offers an up to date overview of IT spending trends and forecasts in the U.K. financial industry.

Starting with trends affecting IT demand in the U.K. banking and insurance markets, the study explores major drivers and trends in IT adoption. On the quantitative side, the focus is on U.K. spending on hardware, packaged software, and IT services. Forecast data is split for banking, insurance (life and non-life), and securities companies.