by CIO UK Staff

CIOs still face budget cuts in tight economy

Apr 19, 20093 mins
Financial Services IndustryIT LeadershipIT Strategy

CIOs will continue to face scaled back budgets and investment plans from their organisations, the Confederation of British Industry said today in its latest economic forecast. The forecast was not all bad news though, with the CBI stating that the worst of recession “may be” behind us. The CBI said investment plans will continue to shrink by 9.3 per cent throughout the rest of 2009 and will shrink a further 3.4 per cent in 2010. CIOs are likely to see their investment budgets cut as long term IT projects continue to be cancelled or their operating budgets decreased. A number of CIOs have told CIO UK in recent weeks that they are being asked to “soft pedal” or “sweat” their existing teams and assets. Vendors are also reporting increasingly hard-nosed negotiations with CIOs. Outsourcing organisations though, are reporting increased interest and significant deal wins since Christmas. “The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected,” said Richard Lambert, (pictured) CBI director general. “Firms have been running down their stocks of completed goods, and that is having a real impact on output, jobs and investment.” The British economy will have shrunk by 5.1 per cent by the end of the recession, the CBI predicts. In the deep recession of the 1980s under a Conservative government the economy shrunk by a larger 5.9 per cent. The CBI expects the recession to last until the end of this year, with six consecutive falls in gross domestic product. It expects growth to slowly come back in the second quarter of next year and to grow throughout 2010. “There are a few tentative signs that the steepest phase of the recession is now behind us,” Lambert claimed, “and that the banking packages aggressive monetary policy and fiscal support will steady the pace of decline from here on,” he said of the government’s interventions. “The recession is by no means over, but we see a return to very weak growth by spring 2010.” The recession deepened in the first three months of this year, according to the CBI due to further falls in industrial output. With the pound now weaker, exports set to grow, inflation at an all time low and the global fiscal packages, the CBI believes the decline in UK GDP will slow before improving 0.2 per cent quarter-on-quarter from the second quarter of 2010. But the CBI warns that unemployment will continue to rise over the next 12 months. With the Chancellor Alistair Darling set to make his budget speech on Wednesday, the CBI advised him to “avoid any further major fiscal boosts” to the economy.