Pay for UK IT consultants has shot up 17% over the past year, fuelled by soaring demand for skilled and experienced professionals to meet public sector outsourcing needs and integrate systems after a huge wave of merger and acquisition activity, new research has revealed.

Average pay for IT consultants rose from £41,500 in 2005 to £48,383 last year, with many consultants earning considerably more, the research by SkillsMarket and the Association of Technology Staffing Companies (Atsco) found.

Demand for external consultants has hit record levels due to an unprecedented boom in merger and acquisition (M&A) activity and the continuing outsourcing of IT development in the public sector, Atsco said. Public sector spending on external consultants hit £2.8 billion last year, up 33% on the previous year.

Atsco chief executive Ann Swain said: "Demand for consultancy skills has surged on the back of the recent M&A boom. Post-merger integration of IT systems can be a hugely complex task, and companies rarely have the resources to manage the process internally."

She added: "Consultancies have embarked on aggressive recruitment drives in recent months to cope with the volume of M&A business, but skills are now in very short supply. Rival consultancies are locked in a bidding war for skills, which is creating a wage spiral."

Swain said IT services firms such as LogicaCMG had "told the market that if they cannot get the staff they will have to turn work away".

Consultants could also offer a "technological advantage over in-house managers" because of skills and a successful track record gained from previous employment in similar projects, Swain said. But she warned: "Companies have to be careful not to hollow out too much of their IT skills base."

Concerns over the cost to the public sector of hiring consultants – highlighted in a recent National Audit Office report – was not enough to stop the trend, Swain said.

"The primary driver of this growth is the scale and complexity of public sector IT programs, which cannot be managed in-house, and often involve multiple consultancies working on the same project," she said.

"The public sector is putting more emphasis on transferring skills to project teams in-house, but for the smaller public sector agencies, in-house management is unlikely to be a viable option."