IT defies service sector slowdown

IT has emerged as the only bright spot in a gloomy report on the service sector, which relapsed in August to when the financial crisis was in full swing 16 months ago.

Both in terms of new orders, and existing business activity, Computing and IT topped the purchasing managers' index for the service sector, according to CIPS/Markit.

Much more widely, however, a general slowdown in new business growth, coupled with public cuts and economic uncertainty, prompted service firms to axe jobs.

The rate at which positions were disappeared was the strongest since last October, the index authors said, thanks to a mixture of redundancies and not filling vacancies.

"The lowest growth rate in the services sector for over a year does seem to reflect what's been happening elsewhere in the economy," the CIPS said.

"Austerity measures and the upcoming increase in VAT appear to be weighing down on confidence."

Nowhere was the gloom more visible in August than in Business Services, where both new and current business activity fell - in contrast to the IT/Computing sector.

"Anecdotal evidence from panellists in the sector indicated that demand for IT projects was recovering, boosted by the offering of new services and increased orders from clients based in [the] EMEA [region] and India in particular," Jack Kennedy, economist at Markit told CUK.

"However, there was some evidence of softer demand from the UK public sector. Interestingly, IT/Computing saw the sharpest fall in prices charged during August, suggesting that providers in the sector were able to attract new business partly through discounting."

David Noble, of CIPS, reflected: "The next three months will be critical. Competition for new business will be fierce as companies contend with the pressures of higher costs, overcapacity and a 'wait and see' attitude from buyers."

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