VARs' 2009 profit slashed almost £2bn

Feeling the pinch: Many resellers will have to make further job cuts in 2010, Plimsoll claims

The economic climate has eroded UK resellers' bottom lines to the tune of £1.8bn in the past year, research has claimed.

Figures from Plimsoll reveal more than half of the market's leading VARs are making less profit than they were this time last year. The analyst claims 618 of the top 996 VARs in the UK have "borne the brunt" of the recession, with profit margins taking a pummelling.

Plimsoll senior analyst David Pattison claimed many channel firms will have to reconcile themselves to another year of cutbacks.

“With demand so subdued and the resultant competition, many companies are unable to charge the price they need to make healthy profit margins," he said. "In the absence of pricing power, many companies will have to make painful but necessary cutbacks in the next 12 months."

Pattison added that job cuts and insolvencies would continue to be the order of the day next year. But he pointed out that, despite the gloom, 202 UK VARs have maintained or even grown profit margins in 2009.

"While some of these companies made cutbacks to match their lower sales expectations, others have managed the Holy Grail – they have grown their business and increased their profit margins in a recession," he said.

"Those companies prove that an efficient business selling the right product to the right market can still succeed in the UK IT resellers industry."