Retailers’ IT budgets have fallen on average by about 20 per cent in the past year, as the recession has forced retailers to do more with less.

The average IT budget as a percentage of sales is now 1.1 per cent, down from the 1.3 per cent figure that had been maintained for the previous four years.

The figures have been compiled by Martec International, which has surveyed 100 of the top UK retailers for its IT in Retail report, sponsored by BT Expedite.

Martec managing director Brian Hume said the figures are skewed as like-for-like figures are down and a few retailers such as Morrisons are investing in major business transformation projects. Many retailers are likely to have seen their IT budgets fall by more than 20 per cent in absolute terms. He claimed that about 15 per cent have made large cuts or significant changes to bring their costs down and some have slashed budgets by up to 50 per cent.

The report suggested that this trend is not likely to be quickly reversed. Hume added that retailers are spending money on technology and projects that allow them to sweat their existing IT assets.

Store systems, e-commerce systems and time and attendance systems were the kind of systems that retailers are most likely to replace or implement for the first time.

Store systems remain retailers’ top priority for the next three years, although the number that cited this has fallen from 24 per cent to 19 per cent. The second priority, e-commerce, has risen in importance.

Cost cutting was mentioned as a key priority by 7 per cent of those surveyed, up from 4 per cent last year.

Although the major IT outsourcing companies reported strong pipelines from retail, the survey showed that the amount of work IT departments are giving to third-party services companies is down overall. Hume said that retailers may bring some things back in-house to minimise redundancies in their IT departments.