The survey of 21 investment management firms indicates a continued year-on-year increase in IT budgets, following the decline experienced in 2003.

Investit says the figures point to a managed increase in spending - six per cent in 2004 and eight per cent in 2005 - compared to the double-digit increases experienced at the end of the bull market.

But, whilst IT spending levels are growing, the research shows they are not increasing as fast as other revenues or costs, indicating that IT costs have been controlled more aggressively than other costs. Investit says its figures for 2004 and 2005 show an industry average ratio of IT spend to revenues of around 9.5% and IT spend to costs of 12.0%. By comparison 2001 figures were 13.5% and 16.8% respectively.

IT spending per head (full time employee) has been more stable settling at around £23,000 in 2004 and 2005, compared to £25,454 in 2001.

The research shows that much of the rise in budget is accounted for by increases in discretionary IT expenditure, indicating a return to investing in business sponsored IT projects. This investment is dominated by spending on front office systems, with a specific focus on applications to support fixed income and derivatives. Investit says client-focused systems, such as CRM applications, are low priorities.

The survey also shows the growing influence of electronic trading, both through the use of alternative trading systems and the front office FIX protocol. Investit says the majority of survey participants are active FIX users and all participants expressed an intention to use FIX more in the future.

The research also shows continued interest in business process outsourcing, but little enthusiasm for more outsourcing of IT functions.