New Data: Web Security, eBanking Are Driving IT Spending in UK Financial Services;

Many IT Services Companies Are Locating in British Midlands to Address Demand
WASHINGTON--(BUSINESS WIRE)--April 4, 2006--Till at least 2008, the UK will be the leading market in Europe for IT spending in the banking and insurance industries, with eBanking, web security and other issues driving IT growth rates that surpass those in the US. That growth, in turn, spells opportunity for US systems integrators and other IT services companies.

The new country-based growth analysis was revealed today by Datamonitor analyst William Conner at a Washington roundtable sponsored by The British Midlands. This is the first time Datamonitor, the largest European-based analyst firm, has released a country-specific look at IT spending in these key industries over the 2004-08 timeframe.

Datamonitor views the UK as the prime location in Europe, with an industry-leading $23 billion on IT spending in banking and $16 billion on IT spending in insurance in 2006 alone. Datamonitor also projects that the UK will continue to lead Europe in IT spending in both banking and insurance through at least 2008.

From 2004 through 2008, the compound annual growth rate (CAGR) of IT spending by UK banks is 8.1%, compared with 4.5% in the US. Over the same period, IT spending in the UK insurance industry shows a CAGR of 4.1%, compared with 3.5% in the U.S.

Reflecting this opportunity, Conner, EMEA manager for Datamonitor, noted that a number of major US IT companies, including IBM, CSC, Sungard, Unisys and Misys, have operations in the centrally located British Midlands. Vern Sebby, CEO of The British Midlands, cited several reasons why this is the case.

"The Midlands is ideal for IT services companies serving UK-wide clients," Sebby said. "Several reasons include the region's central location, its world-class information and telecommunications infrastructure and its high concentration of computer science graduates."

In recent years, Sebby noted, the British Midlands has seen a 20 percent increase in the number of high technology companies. "The number of large, US-based IT services companies located in the Midlands has increased significantly, with companies such as EDS, Perot Systems, Oracle, SAIC, Northrop Grumman and Lockheed Martin conducting business in our region," Sebby noted.

Conner notes that IT security is commanding attention in UK banking circles. Financial services, he said, is surpassed in security technology spending only by manufacturing.

"Losses from Web banking fraud rose 90% in 2005," Conner noted. "And while the introduction of chip and PIN technology helped cut credit and debt card fraud for the first time in a decade, organized gangs of fraudsters are now increasingly targeting the Web."

Conner cited the growth of "pharming" scams, a variation of "phishing" in which fraudsters hijack domains and secretly redirect users to fake sites in order to gain their password and log-on information. Barclays in the UK is now offering discounted antivirus software in a bid to secure customers' computers against spyware and to alert them to potential pharming websites.

According to Datamonitor's Conner, the emergence of eBanking technology is the biggest single factor driving the growth in European banks' IT spending. "The online channel will remain the top channel in terms of IT investment growth in 2006," Conner said. He expects eBanking spending in Western Europe to reach nearly $3 billion by 2008. Once again, Conner noted, the UK is by far the largest European market for this technology, with UK banks' spend on eBanking technology expected to reach $671 million by 2008.

Sebby noted that the British Midlands can be an ideal location for IT companies serving not just the UK, but all of Europe. "With our near-London location, The British Midlands is a very attractive site for US companies seeking a central site for their European operations," Sebby said. "In addition to our location and highly skilled IT labor pool, we also offer a well-developed financial services sector, excellent quality of life, and commercial office space at very competitive rates."

Datamonitor plc, a premium business information company specializing in industry analysis, helps its clients, 5,000 of the world's leading companies, to address complex strategic issues. Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiased expert analysis and in-depth forecasts for seven industry sectors: Automotive, Consumer Markets, Energy, Financial Services, Pharmaceuticals and Healthcare, Technology, Transport and Logistics.

The British Midlands is the economic development agency for central England. Its region includes the major commercial centers of Nottingham and Birmingham, plus many equally attractive business centers in smaller cities and towns. With 650,000 people employed in the financial and business services sector, the area offers world-class skilled labor and highly competitive operating costs, just 90 minutes from London.

Contacts
Financial Dynamics
Jim Sloan, 312-861-4704