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Software sector 'worst performing in UK'
…global credit crunch taking its toll?

By Nick Heath

Published: Wednesday 16 January 2008

The software and computer services sector was the worst performing sector on the UK stock market last year.

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The research by Ernst & Young covered all listed companies in the UK and found 56 profit warnings from 43 companies in the software and computer services sector - 26 per cent of the sector up one from 2006.

Delays or discontinued negotiations were the biggest reason for the warnings, with most coming from smaller companies as a result of over reliance on too few products or customers.

This was against a background of 107 warnings by UK quoted companies, the highest quarterly figure since the last quarter of 2001, a 22 per cent increase on the same period in 2006.

John Hughman, senior technology analyst at Ernst & Young, warned the problems could continue next year as IT vendors curb their spending in wake of the global credit crunch.

But Hughman said the difficulties were not a reflection on the sector as a whole.

He said in a statement: "2007 has generally been a good year for UK software and IT service stocks, reflecting the wider strength in the global technology market."

There was also a fall off in the number of warnings in the software and computer services sector during the final quarter of 2007, falling from 15 to nine.