C&W issues profit warning on public sector cuts
Shares slump at unscheduled update
Cable and Wireless shares tumbled more than 20 per cent this morning after it warned investors it would miss profit targets because of cuts in the public sector.
"Following the new government's emergency budget in late June, non-contracted spending in the UK public sector has slowed very significantly," it said in an unscheduled trading update.
"Given the nature of our public sector business, this reduction will adversely impact trading in the current year."
Cable and Wireless is a major network builder for both central and local government. Among many big contracts, it runs the Government Secure Intranet, used by Whitehall departments to shift data between their networks. Today's announcement indicates bosses expect new work to be scarce.
Despite the warning, Cable and Wireless said it supports the coalition's approach, which is expected to involve cuts of 25 to 40 per cent throughout the public sector. It said the first quarter had been in line with expectations, but as the emergency budget takes effect times will be tougher. ®