Impact of Brexit on IT Spending Not Limited to the UK

Brexit has caused modest growth in global IT spending to turn negative for 2016, according to Gartner, Inc.

"Without the U.K., global IT spending growth would have been modestly positive at 0.2 percent in 2016, but with the U.K. included, IT spending is expected to decrease 0.3 percent,” says John-David Lovelock, research vice president at Gartner.

“The immediate impact of the British pound will also cause the IT spending patterns to shift as prices for IT will increase."

Companies will be monitoring negotiations closely, and there will be some changes in IT investment. For example, in financial services, analysts expect to see some countries in Europe put more investment in IT to offer a more viable option for EU countries than the U.K.

"We see software and IT services spending in Germany and France increasing, while U.K. services stay relatively flat," Lovelock said. "There are other countries, such as the Netherlands, Luxembourg and Ireland that are also increasing their IT spend to contend as a viable alternative to banks in the U.K. We are seeing examples of many banks in talks with these countries to examine the possibility of moving their operations outside of the U.K."

Outlook for 2017

Driven by growth in software and IT services revenue, worldwide IT spending is forecast to reach $3.5 trillion in 2017, up 2.9 percent from 2016 estimated spending of $3.4 trillion.

The bright spot for the IT industry has been the software and IT services segments. Software spending is projected to grow 6 percent in 2016, and it will grow another 7.2 percent in 2017 to total $357 billion.

IT services spending is on pace to grow 3.9 percent in 2016 to reach $900 billion, and increase 4.8 percent in 2017 to reach $943 billion.

U.S. elections

With the U.S. presidential election three weeks away, Gartner analysts do not believe the pending election, or the winning candidate, will effect IT spending trends.

"We have also taken into account the U.S. presidential race, as well as a potential rate cut by the Federal Reserve. Typically, there is a slight pause in IT spending leading into the election, and then a relief in spending, subsequently.

“However, trends have shown that IT spending in the U.S. is not dependent on presidential leadership, so neither candidate should have a significant impact on IT spending in the near-term,” notes Lovelock.

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