UK ITC Sizing Highlights
- UK ITC market spending was £201 billion in 2010
- A drop of 5.5% expected to £190 billion in 2011
- Consumer spending dropping along with business
- Public spending less affected than private
- Transport/…, Agriculture/…, Manufacturing and Education worst affected
- Health, Retail/… and Finance least affected
- Hardware to show a small 0.6% growth, while Telecom Service to drop 8.9%
- Software (-1.0%) and IT Service (-6.0%) will decline
- BT leads UK ITC markets, making £12 billion in 2010
- Vodafone and Apple have grown rapidly
- The double-dip recession will require accurate targeting of less-affected sectors
- Cloud Computing will be a countervailing business this time round
Here at ITCandor we’ve got lots of country data, we’ve also got a few presentations to give. In this post we look at the UK ITC market, working from the top down from vendor revenues to industry sectors with the methodology described in our About page above.
The UK Double-Dip Recession Is Upon Us
ITCandor started its research in May 2009 – at the lowest point of the last downturn in ITC sales. Since then it has focused on sizing and forecasting the market, with a close look at the types of events that occurred in earlier periods of our industry. There has been a reasonable recovery and return to expected seasonality since then. However the UK market was worth some £201 Billion in 2010 – around 14% of GDP: therefore it is going to be more affected by the economic downturn than mmost other countries. Although there here has yet been a signal event such as Black Wednesday, September 11th, or the collapse of Lehmans, there is plenty of evidence to suggest the next downturn has begun. In case you need reminding:
- Sovereign Debt is a significant problem affecting countries who borrowed massively against future economic growth, especially in the UK, where government debt increased significantly in the bail out of major banks in the Credit Crunch and the economic situation was largely ignored as our MPs squabbled about their expenses for a year and a half
- Our Austerity budget is now resulting in job losses in the Public Sector and a downturn consumer in spending
- The Euro Crisis continues, with a number of smaller countries on the verge of financial disaster – held up by membership of the common currency and the benevolence of Germany and other large member states; the UK has an advantage in having significantly devalued our own currency, but it will be disastrous here if and when the Euro fails
The difference between 2011 and 2008 is that we can no longer rely on consumer demand to make up for the shutdown in corporate spending. If anything business spending on ITC had overtaken consumer spending in the last few quarters. This time capital spending is being cut in all sectors, so it may be useful to see how global companies can adjust their international sales activities to make the most of their opportunities over the next two years. The data included here is only a tiny part of our over all coverage – so please contact us if you need more for your planning purposes.
ITC Spending Is Falling 6% In 2011
Consumer spending on ITC held up relatively well in 2009, but has been matching the decline in company spending in 2010 (when there was no growth) and in 2011, when it looks likely to decline by 5.1%. Added to the 6.0% decline in business spending, the total market will decline by 6% to reach £190 Billiin (see Figure 1).
Telecom Spending Is Being Worst Affected
It looks likely that Telecom spending will be hardest hit in 2010, declining by 8.9%. IT Services will be down 6% and Software by 1.0%. Hardware – driven in part by the enthusiasm for all things Apple – will grow by 0.6%. Overall however we can see the beginning of a new slump similar to that suffered by most other countries in 2009. A picture of our findings are shown in Figure 2.
Large Companies Are Cutting Most, But Consumer Spending Is also Down
As during the Credit Crunch large businesses – those with over 1,000 employees – are cutting early. We believe their spending on ITC will be down by 9% to £38 billion in 2011. Medium companies will spend 7.6% less (£14 billion), while small businesses purchases will decline by 2.7% to £46 billion. As discussed above consumer spending is taking a hit for the first time 5.1% to £91 billion. Market sizing for all years are shown in Figure 3.
Of The Large Industry Sectors, Manufacturing Will Be Hit Worst
We break our statistics into 11 broad categories, using SIC codes. Our results are shown in Figure 4. Surprisingly for a country so dependent on Financial Services, Manufacturing still spends most on ITC. We believe it will spend 9.9% less in 2011, paying a total of £19 billion. Transport/Communications/Utilities as a sector will decline most (-14.8% to £14 billion), while Agriculture/Mining/Construction will also reduce spending drastically (-11% to £5 billion).
Interestingly the two government sectors have not declined as much as the worst sectors – Central will be down 5.1% to £9 billion, while local will actually grow 0.7% to £11 billion. Unlike commercial businesses the Public sector spends a lot of time making cuts – expect spending to decline significantly in 2012.
The Finance sector is also holding up surprisingly well – we expect it to drop by just 2.6% to £14 billion. You should expect some dramatic falls if the severe economic uncertainty we’re currently suffering turns into a disaster. The UK government is highly unlike to be able to rescue failing banks in a new downturn and dead companies spend nothing on ITC.
BT IS The UK’s Largest ITC Vendor In All But One Sector
We looked at how each of the vendors was performing in each industry sector and show the results for 2010 in Figure 5. It demonstrates the lead that BT has in all sectors apart from Finance, where IBM leads due to its strongly-tied mainframe business.
HP is strong in Manufacturing and Transport/…, while Apple challenges the wireless providers BT, Vodafone and O2 in the consumer space. It has made even more inroads during 2011 of course.
The UK’s Largest Suppliers Are Communications Companies
We show the development of revenues for the UK’s leading ITC companies in Figure 6. It demonstrates the local nature of Communications. On a country basis the Telecoms companies are usually strongest, while the global presence of the IT suppliers gives them a lead on a worldwide basis. The exceptions tend to be in the US, where AT&T and Verison vie with Apple and Samsung for leadership.
In the UK BT, Vodafone and O2 have the largest revenues – threatened by any dip in consumer spending. Virgin Media, formed from Telewest ad NTL in 2005, quickly achieved a good position. Of the IT vendors Apple and Samsung are above HP and IBM largely due to their success in selling mobile phones and, to a lesser extent, tablets. Apple’s rise has been spectacular of course.
Some Conclusions – Industry Sector Success Can Tell Us About Vendor Prospects In A New Recession
In the last recession those suppliers with consumer business tended to do better, while those with only large customers tended to fare worst. Things are going to be more complicated this time, but by analysing and targeting less-affected sectors is likely to help sales.
It is also important that the investments suppliers have made in virtualisation and Cloud Computing will make it a countervailing business, similar to data centre outsourcing in 2000. Cloud Computing was just too immature in 2008 to make any real difference then.
We intend to report more of our findings in future of course.
Filed under: Market Share And Forecast, Cloud Computing, Vertical Markets, UK
