The ripple effects of recent US tariffs could hit sectors well beyond those currently in the firing line, or so warns TechMarketView.
In January, the analyst revised its growth forecast for software and IT services (SITS) down to 5.3 percent annually through to 2027 from its previous 6 percent forecast. Real-term growth is set to be limited to just 2.9 percent, it said.
US President Donald Trump announced a series of global tariffs on April 2, followed by a shifting of positions too numerous to mention here.
Nonetheless, TechMarketView (TMV) said the tariff situation threatens to further constrain technology investment in certain sectors while potentially accelerating it in others.
Some sectors would see a direct impact from the tariffs. For example, the UK automotive sector faces a 25 percent tax, although the British goverment hopes to negotiate that down.
However, sectors not directly affected would also be hit. Owing to the market and economic turmoil following the tariff announcement, pressure would be borne by financial services, for example, TMV’s report says. Since financial services, along with the UK public sector, are among the highest spenders on IT, a modest impact could be more dramatically felt on the tech market as a whole.
“The UK’s two largest SITS verticals – public sector and financial services – together comprise nearly 50 percent of the market and face significant indirect impacts despite not being primary tariff targets,” thee report adds.
“Market volatility and economic uncertainty will drive cuts to discretionary spending, though strategic technology investments with clear ROI [return on investment] will continue. The funding environment for startups and scale-ups also faces significant pressure.”
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Tech departments in financial services companies should expect discretionary spend reductions, delayed transformation initiatives, and postponed investment in experimental technologies, TMV’s report says.
However, there may be upsides for IT investment, such as investment in tariff exposure analytics for loan portfolios, trade disruption risk assessment tools and stress testing for economic volatility scenarios, and market diversification support for clients, the report claims.
“Financial services organizations, while not directly impacted by tariffs, face more significant indirect exposure than initially apparent. The sector’s deep connections to tariff-affected industries create meaningful secondary effects. Market volatility, economic uncertainty, and the prospect of a sharp downturn are bad news for the financial services sector.
“Meanwhile, the investment portfolios of banks and insurance companies have been hit hard by the fallout from the introduction of tariffs by the US administration. Furthermore, real instability in the global financial system cannot be discounted in this developing situation. As a result, growth forecasts are being revised sharply downwards, and funding for operational investments is very likely to be negatively affected as a result.”
However, some transformation spending is imperative as banks and insurers recognize that technology is strategic in terms of competitive advantage.
“Investment in technologies such as cloud and AI should maintain their appeal where a strong business case exists,” the report says. ®
