Demand for IT staff is expected to grow by 12 per cent over the next two years, quashing claims of widespread pessimism across the industry, says a new IT survey from NCC.

But while demand for systems developers is expected to increase by as much as 18 per cent over the next two years, the Salaries and Staff Issues in IT 2002 survey of 490 IT managers, found that predicted demand for operations staff is continuing a downward trend. Overall, demand for staff remains virtually unchanged from last year.

Salaries across the industry are starting to feel the bite, although average salaries are up four per cent on last year. The average rate of increase on total salary reported by respondents was 4.9 per cent, compared with 5.2 per cent last year.

Those in the IT, business services and finance sectors are this year's winners in the salary stakes.

Dominic Cornford, research consultant at the NCC, said the survey results painted a picture of restraint rather than doom and gloom.

"The figures suggest people are a bit more cautious and are starting to hold back, but it's not 'we're on the brink of an abyss' stuff.

"We're so used to looking at a picture of growth in the IT industry but prospects aren't as good as they have been. For job seekers it means there won't be as many jobs to choose from."

IT professionals in London continue to receive a premium over their colleagues in other parts of the country. Salaries in the south east of England are also consistently higher than the rest of the UK.

"There's an undue amount of pessimism and a lack of confidence from clients and candidates alike," said Simon Crockett, operations director at IT recruitment specialist Michael Page Technology.

The majority of respondents think they will need to develop new IT skills over the next year, with XML and Java top of their technology wish list.

"Demand is still there but it's outstripped by supply. Clients are also much more specific about the skill sets they need. Small companies want generalists but they aren't recruiting," Crockett added.

Although the survey found that the number of companies using contractors is up two per cent on last year to 31 per cent, fewer respondents report using large numbers of temporary IT staff.

"Contractors are certainly used as a stop gap," Cornford said. "They are also one of the first things to go when companies look to cut costs."