Corporate IT budgets are still tight

The study, by Ernst & Young, found firms are concentrating on growing their business in the current environment, rather than trying to anticipate when conditions will improve.

It said corporate customers in the UK are reluctant to spend on projects that do not generate returns within 12 months.

There is also intense pressure on tech firms to lower their prices.

Europe upbeat

A scarcity of new orders is increasingly forcing smaller companies to forge alliances with big, established players in order to survive.

Ernst & Young technology partner Nick Powell said the latest findings revealed a sharp deterioration in sentiment compared with the last survey, carried out in February.

"In February, there was more confidence for an upturn, but now senior executives are resigned to the current flat market," he said.

"There is a general acceptance that the days of irrational exuberance in the IT market are over. "

However, the outlook for tech firms in mainland Europe is more encouraging, according to a separate survey.

The European Information Technology Observatory (EITO), an industry monitor, forecast that demand will grow by 1% this year to 590 billion euros (�413bn ; $690bn), reversing a 0.8% decline in 2002.

Demand is set to accelerate again next year, with sales climbing 3.1% to 609 billion euros.

"The trend turnaround has been achieved," said EITO managing director Bernhard Rohleder.