IT insolvency levels fall as firms shape up

The number of IT firms going bust decreased in the first quarter of the year, according to figures from credit reference agency Graydon.

But channel players are being warned to get their businesses in shape to avoid the credit squeeze.

January 2008 saw four administrations, 10 creditors’ meetings and 16 winding-up petitions issued compared with 14 administrations, 19 creditors’ meetings and 13 winding up petitions in 2007.

Figures fell in February with nine administrations (11 in 2007), 14 creditors’ meetings (19 last year) and 16 winding-up petitions (no change). March paints a similar picture.

Mark Ancell, head of intelligence at Graydon, told CRN: “The channel appears to be holding its own in the first part of the year, but there are larger insolvencies to come. Last year we saw some sizeable failures, including Evesham and Watford Electronics.

“The credit crunch in the US will filter to the UK and a lot of analysts are talking about a recession,” he said. “But firms that have their back-office business in good shape and are not borrowing heavily should be able to weather the storm.”

Nitin Joshi, founder of ChannelMoney, agreed: “Last year some large players went out of business and some distributors’ debts were large. Distributors now have a more measured response and have learned from those mistakes. But I think we are seeing the calm before the storm.”

Eddie Pacey, director of credit at Bell Micro, said: “Lenders will get tougher with credit terms. System builders and sub-distributors operating on thin margins will be hit.”