Swiss broker UBS has downgraded both recruiter Hays (LON:HAS) and outsource specialist Capita (LON:CPI).on the possibility of a severe cutback in IT spending post–Brexit.
Capita has already issued a major profit warning but more pain may be on its way said the broker.
UBS surveyed IT buyers across the UK, France and Germany to gain insight into how B2B (business-to-business) service spending might be affected post-referendum.
According the broker, some 22% of companies are planning hiring freezes, 20% plan to use fewer IT consultants, and 39% of IT projects are being delayed/cancelled.
The broker concludes that a 20% decline in most areas of B2B discretionary spending is a reasonable expectation, with no lifting of the uncertainty until 2019.
As well as Capita, Mitie (LON:MTO) and Aggreko (LON:AGK) have warned already on trading and UBS is cautious over prospects for these and also other outsourcers such as Serco (LON:SRP).
Hays, meanwhile, has had its rating cut to ‘neutral’ from ‘buy’ though its price target rises to 140p.
Capita’s price target has been slashed by 40% to 675p given the uncertainty UBS sees over IT spending.
“B2B spending is clearly under pressure, and despite Capita's plans to structurally reposition weak units we struggle to see scope for a sudden rebound.”
Capital shares fell 4% to 608p and Hays dropped 1.5% to 133.3p.