Friday, 17 October 2008

Logica in gear for a zero-growth Europe

(By Anthony Miller) Logica CEO Andy Green gave a measured report on market conditions this morning on BBC Radio 4's Today programme (click here for replay). With Germany recently cutting its growth forecast, Green felt that a flat European economy was something Logica could live with. Echoing our UKHotViews comments yesterday (see Swiss bank news signals another grim day on the markets), Green felt CEOs should not be trying to manage their companies' stock prices but should get on with managing their businesses. Exactly so. He felt that Logica could get by without forced layoffs by reducing hiring (they recruit some 7,000 people a year, 5,000 in Europe) and natural attrition, which he implied was currently at 17-20%. Green also gave a guarded hint that the UK government needs to rethink its policy on taxing overseas profits, else UK-based multinationals like Logica may be forced to relocate their HQ elsewhere. Again, fair comment, and one we hope is heeded in the right places.

Our main proviso on this otherwise pragmatic view on the market is that zero European growth is probably too optimistic, and we hope Logica is able to make the necessary structural adjustments to its cost base quickly enough, to respond to what we believe will be a rapidly worsening - and therefore increasingly competitive - marketplace.

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