Recession could force UK software firms out of business

The UK computer software market is moving towards recession and one in five companies could disappear, according to analyst Plimsoll.

The Plimsoll study looked at how the UK slowdown is already affecting the software market.

The full analysis, to be published on 1 May, has drawn on the latest figures for each of the UK's top 2,000 companies in the software market.

Headline figures show over a third of companies are already showing signs of recessionary behaviour and reporting declining sales. This is immediate evidence that the market is slowing down, said Plimsoll.

Over half of companies have seen their margins fall. Over a quarter of these are running at a loss.

These companies are struggling against rising costs and declining sales, Plimsoll said.

The analyst said 40 of these firms have seen an increase in their need for short-term finance, a sign that costs are running ahead of cash flow.

This is dangerous at a time when banks and financiers are looking hard at their loan books, placing these companies in an even more vulnerable position.

As many as one in five software companies could disappear completely if this trend continues or deepens, Plimsoll predicted.

David Pattison, an analyst at Plimsoll, said, "I hope this report is recognised as an early warning sign and managers read this and use the findings to steer a course though these tricky times."