Logica, the information technology service provider, said it was under pressure to raise salaries due to signs of a more buoyant jobs market in the technology sector.
Seamus Keating, chief financial officer, said improving job prospects in the sector meant that the turnover of staff at Logica had increased.
Attrition levels were “up significantly on the same time last year” at 13 per cent, compared with 7 per cent in 2009. Logica, which employs about 39,000 people, said it was recruiting across the group and was paying particular attention to hiring staff in its offshore centres in Morocco and India, where salaries have also risen.
The comments came as Logica reported a 1 per cent increase in third-quarter revenues of £863m ($1.4bn) compared with the same period last year. Orders stood at £758m. Financial services grew strongly during the quarter as banks prepared for Basel III and acquisition and disposal activity increased.
The group maintained its full-year forecast for stable sales and operating margins in line with 2009. Mr Keating said Logica was expecting “overall growth” for 2011.
However, Anthony Miller, managing partner at TechMarketView, said he was concerned that Logica was not doing enough to increase its competitiveness and improve margins, compared with peers, by raising the number of offshore staff.
Logica employs 5,750 people in lower-cost offshore sites.
“Logica talked about attrition and the labour market hotting up but said pricing was staying the same,” said Julian Yates, analyst at Investec. “The group is on track for the fourth quarter but beyond that the results were a bit uninspiring.”
Logica reported growth on mainland Europe during the quarter, particularly in France and Sweden. However, revenues in the UK were down 11 per cent as the government’s public spending review delayed decision-making.
The UK Cabinet Office has asked all its service providers to come up with cost savings on their public sector contracts. Logica, which derives two-thirds of its UK revenues from the public sector, is among a handful of technology and communications companies to have struck a deal to keep its existing government contracts.
However, as with the other service providers, Logica provided little detail on exactly how it has helped the government save costs.
Mr Keating said that by signing the deal, Logica had “opened the door” to longer-term conversations about how it could work with the government to cut costs. He said there were also signs that government activity was increasing.
Logica shares closed down 5.3p at 127.9p.