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UK reseller insolvencies defy gloomy predictions

Microscope contributor

Reseller and distributor insolvencies fell by double digits during the second quarter proving wrong the soothsayers that had predicted a bloodbath.

Figures by Graydon UK show that a total of 61 firms went to the wall, down 16% on the same period a year ago. For the first six months of 2010, voluntary liquidations and receiverships dropped 10% year-on-year to 122.

The prudence of dealers and wholesalers was apparent said Alan Norton, head of intelligence at the credit reference agency, "many IT businesses have been quick to react and cut costs to remain competitive."

"Overall the IT sector has remained remarkably resilient compared to some other industries such as hotels and restaurants which are suffering terribly," he told MicroScope. 

Following the release of Q1 insolvency numbers, industry figures voiced concerns that banks' refusal to loan to SMEs, the roller coaster nature of IT demand and the high cost of credit would lead to a rise in company failures from Q2 but that has not yet materialised.

However Norton added that "concerns remain about the impact cuts in government spending will have on the sector". 

Market watcher Canalys last month warned resellers which are reliant on the public sector will need to "quickly target" the private space in the second half of the year as the coalition government looks to hack away at the budget deficit.

The reduction in insolvencies was welcomed by Eddie Pacey, European director of credit services at Bell Microproducts, but he urged the banks to demonstrate a little more flexibility in their lending criteria.

"The market may get a little tougher in certain areas but support from distributors will remain in place," he asserted.


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