$5bn slashed from global financial services' IT spending

As the banking sector continues to struggle in the harsh economy, IT budgets are starting to feel the pinch.

IT spend across the global financial services industry will experience an overall decline of 1.3 per cent in 2009.

Although a small amount in percentage terms, the value represents a cutback of $5bn, according to FS IT consultancy company Celent, which forecasts total global IT spend in the FS sector this year will reach $353.3bn.

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Celent reported European and North American financial institutions make up approximately three-quarters of that IT spend.

European banks make up 50 per cent of the global banking spend, with $61.6bn.

The consultancy also predicts total IT spend among banks, which account for half of all FS expenditure, will fall by $1.1bn between 2008 and 2009. European and US banking IT spending will fare the worst with an expected drop of six per cent.

Celent's gloomy forecast for global FS IT spending is echoed in the CBI's forecast for the UK FS sector.

A research report by the CBI and PricewaterhouseCoopers, measuring the three months to early December, reported profits had fallen among 55 per cent of the firms surveyed. As a result, capital expenditure in IT for the year ahead has "been pared back sharply", the report authors said.

The report acknowledged the UK banking sector is in a dire state overall but singled out life insurance as a particular area where IT cutbacks are expected.

In a statement, CBI chief economic advisor Ian McCafferty said of general IT spend in the UK FS sector: "Another quarter of falling revenues and heavy erosion of profitability have taken their toll on training and IT budgets and job losses are forecast to worsen in the next few months."