We have just published our tech market forecast for the three largest European economies: France, Germany, and the UK (see “Tech Budget Outlooks For France, Germany, And The UK In A COVID-19 Recession“). Due to the coronavirus and resulting recessions, tech spending in Germany, France, and the UK will decline by 5% to 7% in 2020 from 2019 levels in the best-case scenario. We also think that the UK will be the most vulnerable out of the three countries, with a prospect of a deeper 9% decline in 2020 and continued, but slightly less negative, declining growth in 2021. While tech spending in France and Germany could get dragged down by economic weakness in the rest of Europe and the US, their tech markets are more likely to experience modest recoveries in 2021. Across all three countries, the impact of the coronavirus on tech spending will vary depending on their approach to managing the pandemic, their economic stabilization programs, and preexisting economic and political conditions.
The UK’s tech market will be the weakest in both 2020 and 2021.
- The UK’s tech market will be most negatively impacted, with an expected tech decline under the more pessimistic scenario of 9.3% in 2020 and a 1.1% decline in 2021.
- The UK is more vulnerable because of the country’s delayed pandemic response, its problematic testing program, and its narrower income support packages. The uncertainties related to Brexit are another major negative.
- The most likely scenario will see computer equipment sales drop by 9%, communications equipment by 11%, and software spending by 10%.
France’s tech market will be down in 2020 but with potential for a solid recovery in 2021.
- France will be the second-worst-hit country in 2020, with a 6.6% drop in tech spending under a more optimistic and more probable scenario. The country would have the best recovery, however, with 6.3% growth in 2021.
- Recovery will likely come sooner in France than in the UK because of its aggressive response to the coronavirus, the financial support its government has provided businesses and professionals, and its strong social safety net and business balance sheets pre-COVID-19.
- The most likely scenario will see tech consulting services drop by 7%, tech outsourcing by 7%, and software and communications equipment by 6%.
Germany’s tech market has the best prospect for a relatively small and short drop.
- Germany will decline less compared to the UK and France in 2020, with a 5.2% drop in tech spending, and will have a mild rebound of 4.1% in 2021 assuming that its economy starts to revive in Q3 or Q4 2020.
- Germany’s recovery will be helped by its extensive COVID-19 testing, strengthened employment support programs, and strong business balance sheets pre-COVID-19.
- The most likely scenario will see computer equipment sales drop by 8%, tech consulting services by 6%, and software by 5%.