Spending in the IT sector in 2007 is now expected to be much tighter than previously predicted.

In December, analyst group Gartner dramatically scaled back its forecasts for IT budget increases for the year, forecasting spending across all industries will average 2.8%, less than half its earlier projection of 6%.

The original number was based on research undertaken by Gartner in the first six months of 2006 from IT executives at 807 organisations with more than $1 billion in revenue who were upbeat about their 2007 budget rises. But, when the same question was posed towards the close of the year, the executives’ outlook was much more pessimistic.

The research shows that budget increases will vary widely across industries. In 2007, the most significant IT spending growth is expected within the media sector, with a forecasted growth rate of nearly 7%, up from 4% in 2006. At the other end of the scale, spending in the consumer products industry is expected to decline by nearly 6%, down from an 8% increase in 2006.

Gartner says that while there are a number of reasons for the slashing of the spending forecasts, the principal cause is the rising cost of supporting other core business operations. This includes general running costs such as energy requirements and the ever-increasing costs accumulated in order to adhere to regulatory requirements.

This increase in essential ‘run the business’ costs is leaving little in the pot for innovation within the IT department, says Gartner.