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Job cuts could soon hit IT services, CBI finds

Warwick Ashford

IT and telecoms services companies continue to show resilience, but may soon face job cuts like other firms in the sector, according to the Confederation of British Industry (CBI).

Unlike most other services firms, business volumes and profitability for IT and telecoms service providers have remained stable in the past three months, according to the latest CBI quarterly survey of more than 140 UK professional services companies.

IT and telecoms services firms had bucked the downward trend in an earlier survey, but are now less optimistic about the future, with volume of business expected to fall dramatically in the next three months leading to job losses, the survey found.

This is more consistent with the rest of the services sector, where most reported steep falls in business volumes and profitability, the CBI said.

Ian McCafferty, chief economic advisor at the CBI, said recent economic data has highlighted just how rapidly the economy is weakening. "So far, job losses have been relatively small across the whole of the service sector, but with firms predicting faster falls in volumes, values and profitability in the next quarter, we can expect to see significant job losses in the coming months," he said.

The survey found that firms selling services to businesses saw the volume and value of their business, profitability and numbers employed fall at record rates.

Companies are cutting investment plans sharply as worries about future demand intensify.

Companies operating in consumer services saw profitability fall sharply for a third successive quarter. Business volumes and values also fell strongly, after the previous quarter's small gains.

A record number of firms said the cost of finance was likely to limit capital expenditure in the next year.

Although the workforce grew slightly for the first time in a year, businesses are predicting much larger job cuts in the next quarter.


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