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Diagonal IT staff warning

Diagonal, the IT services group which came to the main market earlier this year, has become the latest IT consultancy to warn of a shortage of skilled staff in the industry.

However, Diagonal played down the impact of the millennium on profits in the IT services sector, warning that business from technological problems related to the millennium would only contribute to growth in the short term. The company has decided not to compete for contracts to adapt computer systems for the new millennium, saying there are too many companies chasing too little business.

Unveiling an 82 per cent increase in profits before tax and flotation costs to pounds 1.42m, Mark Samuels, executive chairman, said the dearth of experienced consultants in the marketplace had been an "interesting challenge". Wages have increased dramatically, with Diagonal hiring out its employees for as much as pounds 1,000 a day.

Mr Samuels said the company had benefited from strong revenue growth in the division which installs software for the German company SAP. Diagonal, which made two strategic acquisitions earlier this year - Sequelogic and Conos Resource - is unlikely to make any further purchases in the short term.