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A flurry of profit warnings from UK-listed software and services companies are being blamed on the economic downturn and falling consumer confidence

Thirteen London-listed IT companies issued profit warnings in the first quarter of this year, nearly 50% more than during the previous quarter.

According to consultancy Ernst & Young, reduced IT spending in the financial services industry is to blame for this poor performance.

“Technology stocks have been hard hit, with organisations selling to the financial services sector particularly feeling the pinch as many projects have been put on hold,” said Ernst & Young’s technology director James Bennet.

The financial services industry is taking significant cost reduction measures in the wake of the credit crunch.

A survey of 79 financial institutions by PricewaterhouseCoopers and the Confederation of British Industry found 60 percent were suffering decreases in business volumes and twenty-five percent had cut jobs in the last three months.

Meanwhile the Centre for Economics and Business Research (CEBR) reported 11,000 London workers could lose their jobs this year as a result of the credit crunch, with a further 8,200 losses expected in 2009.

However analysts predict the IT job market will remain buoyant, as banks cut costs in overstaffed areas such as corporate finance and turn to innovative IT as a way of increasing efficiencies and making savings as the belt tightens.

"Other areas of the banking industry got a little bit heavy when times were good, they hired too many people.” explained TowerGroup analyst Ralph Silva. "In IT, this did not happen - there were not enough people", he said.

Further reading

Infosys gives cautious outlook

Recession arrives in Silicon Valley

Nexus of innovation? The financial services industry is struggling under the weight of three decades of technology build-up.

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