UK software and services companies are seeing a gradual improvement in the economic environment, according to research by supplier body Intellect.
According to a survey of its members' chief executives, the first quarter of 2003 turned out to be better - rather than worse - than expected, for the first time in several quarters.
Gerald Harvey, Intellect economist and market analyst, said: "Things seem to have got a little bit better. Looking back at the last quarter there was a more confused picture, but it shows up more now."
Just under half (49 per cent) of the survey's respondents said they were either fairly or very optimistic about their company's prospects for the three months to the end of June, and the same percentage said their turnover rose during the last quarter.
And 58 per cent said their turnover will rise in the next quarter, against 17 per cent who are expecting a fall.
Harvey said that companies are lowering their expectations after being overly optimistic in the past, but that there was some improvement in economic conditions.
A third of companies, fewer than in the fourth quarter of last year, said their workforce had fallen in the first quarter. One in five said staffing had increased, and only 15 per cent of companies expect a fall in their workforce next quarter.
But fewer believed their customers' IT expenditure would increase before the end of June, with many more expecting it to fall.
Any additional spending by customers is likely to be related to cutting costs, along with improving customers' internal processes. According to industry chief executives, most contracts now being awarded have payback times of under two years.
Intellect suggested that lowered expectations for demand and staffing levels may demonstrate improving visibility of the economic situation.
The executives surveyed said web services would be the most important technological development, with content management the next most important.
Nearly three-quarters thought the government's targets of getting all services online by 2005 would not be met. And just over a third (38 per cent) felt government policies were beneficial to their business, but the proportion that said its policies were not rose to 46 per cent.
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