UK companies are taking a cautious and conservative approach to IT and general internal business investment in 2023, but with an eye to a post-crisis future, according to comments by spokespeople for Oracle and the Confederation of British Industry (the CBI).
Oracle’s Siobhan Wilson, who is senior vice-president of EMEA, applications customer officer and UK country leader; and Naomi Weir, director of innovation at the CBI, told IT and business reporters that they are seeing a cautious approach to investment characterising UK business in 2023, in the context of long Covid recovery and the inflationary energy price crisis that have come in the wake of the war in Ukraine.
Weir said that firms are facing a cluster of challenges in 2023 different as those when we went into 2022. “In the UK context, we’re not out of the [Covid] woods yet, and there’s a lot of big global economic machinations in place. I think a big focus for businesses is on being resilient, future fit and taking stock of where they’re at after quite a few years of rapid decision-making under quite a lot of pressure,” she said.
“About the UK economy, the good news is we’re hoping the downturn will be shallow, with inflation set to have already peaked. There is this cocktail of labour shortages, energy costs, and new and changing regulation, post-Brexit. But in some ways, the new normal is uncertainty. For businesses and for business leaders, we should not look to wait for when you’ve got a bit more certainty to make decisions.”
She also commented on there being a “tight labour market” in the UK, especially in respect of digital skills, adding: “It is a fairly tight labour market in the UK, and particularly in technology. We’re hearing right across the economy, individuals with those skill sets are hugely in demand.”
Wilson, when asked if she sees the supplier’s customers in the UK pulling back on making big investments, said: “They’re not. It’s about being very careful. They’re not necessarily pulling back, they’re just looking at questions like, ‘Is this going to make a difference to us?’, and ‘It may not make any sense to us in the next six months, but will it make a difference to us when we come out the crisis?’. If yes, they are still going to do that spend, because they’ve got to think about coming out of a crisis, not just about what’s going to make a profit today. That’s why they’re not necessarily pulling back completely, but just being extra careful about what they are spending on and the reasons why they’re spending.”
For the CBI, Weir said: “Looking broadly across the business space, we’ve seen different phases and a pausing on stuff that was more speculative. And we’ve seen that not just in terms of large businesses, but in terms of research between businesses and universities, which is important in relation to a future pipeline [of products and services].
“So we’ve seen things that were in train being paused. For the CBI, there is an interesting question there about [developing] different incentive structures, or what to look at in policy terms to ensure a supportive environment that will help companies put themselves in a good position in the years to come.”
Their comments chime with recent commentary from IT industry analyst firm Forrester, which says that CIOs should expect a decline in IT spending in 2023, but a resurgence from 2024, as businesses step up technology-led projects and business initiatives.
The firm predicts that between 2024 and 2027, spending on technology in Europe will be sustained by high-value business activities, greater cyber security investment, business cloud use, IT services related to software and data, and increases in private and capital funding.
Weir also commented on the increased salience of cyber security as an investment area for UK companies in 2023: “Businesses are giving higher priority to cyber resiliency. Businesses which perhaps wouldn’t have had that on their radar at the beginning of last year, now do. And that’s thinking about secure and resilient supply chains as well in the current environment.”
Another area she picked out as one as in which companies do look set to invest in 2023 is sustainability: “We hear a lot from business about a real push towards decarbonisation and green, with different drivers perhaps than at the beginning of last year given the energy crisis and its costs – and technology has a real role to play there.”