Rising confidence among enterprises, combined with a general improvement in economic outlook, will see UK IT budgets increasing during this year, market researchers have predicted.

A study from IDC revealed that more than two in five UK firms expect their IT budgets to be increased during 2004, with a focus on priority purchases such as product renewals and upgrades.

"Attitudes remain cautiously optimistic, but IDC has noted the return of key drivers such as technology improvements and innovation," said Elsa Opitz, research analyst at IDC's European IT markets service.

The poll found that interest in areas such as security, mobility, customer relationship management and web services is very apparent in the UK, and that spending on these areas is likely to increase as the economy picks up.

Almost a quarter of respondents cited economic uncertainty as their main business challenge, down from 30 per cent in the previous quarter.

But 64 per cent of firms stated that they feel 'positive' (17 per cent) or 'slightly positive' (47 per cent) that their companies will allocate the necessary budget increases for IT spending in the next 12 months.

Over 60 per cent of companies indicated they are planning to replace PCs, and 43 per cent are planning to replace server equipment.