Graydon warns channel insolvencies set to soar


Graydon warns channel insolvencies set to soar

Paul Kunert

The number of channel firms going to the wall is on the up according to the latest set of insolvency figures from Graydon UK but worse is yet to come the credit reference agency has warned.

There were nearly 20% more insolvencies in first three quarters of 2008 than the whole of 2007 with 199 UK channel firms going to the wall. 69 firms went bust in Q3 compared to 46 in the same period a year earlier.

It has been estimated that in the region of 75 to 100 resellers will go belly up in the final three months of the year, which would represent the worst climb in company fatalities since 2003 when 345 firms went under.

"I think this is the calm before the storm," said Mark Ancell, head of intelligence at Graydon UK, "The number of insolvencies is not going up at an alarming rate but they are rising and we haven't seen the worst yet."

The list of casualties this year has come largely from the small business sector but with the UK economy officially in recession and the global stock markets in turmoil, all channel firms are already feeling the squeeze.

"Tier one customers used to be a safe haven but there is no such thing as a blue chip company in the current climate," said Ancell.

In mid-September, Microscope revealed that a slowdown in projects in the commercial space had become more apparent as user organisations put their IT projects on ice in response to an uncertain outlook.

But the public sector, which spends £12bn to £14bn annually on ICT will not be immune to the wider economic problems said Ian French, managing director at channel consultancy Siceo

"The big one is public sector, it accounts for such a large percentage of IT spending in the UK. We will see a slowdown from local and central Government to health and that will have a big impact on business," he said.

But resellers may have learnt lessons from the peaks and troughs of the market during the last ten years and though sales have slowed, many are tightening the business controls to improve their financial position.

Eddie Pacey, European director of credit services at Bell Microproducts said "More resellers have become acutely aware of credit and the management of receivables.

"They are recruiting specialists in the collection of money and the management of risk and they are willing to check clients out whereas before they were not," he added.

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