Channel will feel the pinch

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Channel will feel the pinch

Microscope contributor


The banking industry collapse which sent shockwaves through the global economy could have severe repercussions for all industries, and sadly the channel will be no different amid predictions that the cost and availability of credit will be impacted.

But the credit crunch was taking its toll on suppliers even before Lehman Brothers went bust, HBOS was rescued by Lloyds TSB and AIG, one of the world’s largest insurance firms, was pulled back from the precipice by the US Government.

In June, MicroScope revealed that Euler Hermes and Atradius were raising premiums by 10% to 15% in response to rising claims from the property and construction industries.

Research this month by Siemens Financial Services found nearly one-third of ICT companies have been warned by their banks that interest rate hikes are on the way. General manager Peter Austin said the problems in the economy were filtering through to the channel.

Credit issues, compounded by the banking woes, may act as the catalyst for more consolidation in the UK channel over the next 18 months than in the previous five years, said Andy Gass, managing director at Computer 2000.

“I think there will be more consolidation in distribution than at reseller level because the margins are lower. It is easier for resellers to deliver services and some in the mid-market have done a great job of building [annuity-based] revenues,” he said.

However, all is not rosy for resellers, with some feeling the squeeze on working capital.

Eddie Pacey, European director of credit services at Bell Microproducts, said some resellers were paying later than usual, “It has become obvious that their cash flow is tighter.”

The largest resellers in the UK have noted a delay in project sign-offs and many are bracing themselves for a tough 2009.

“The whole world is treading with extreme caution,” said Computacenter chief executive Mike Norris.

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