Channel insolvencies drop in Q3

IT channel insolvency figures continue to defy expectations after reseller casualties in the third quarter fell on an annual comparison.

According to credit reference agency Graydon UK, 61 firms in the IT sector hit the wall during the three months to September.

This represents a 12 per cent fall on an annual comparison and is down 16 per cent sequentially.

Bad debt in the channel was also lower and Graydon’s head of intelligence Mark Ancell said the figures show the sector is “going in the right direction”.

Insolvencies for the first nine months of 2009 are also down fractionally on an annual comparison – 198 compared with 199 in 2008 – and Ancell admitted it has not been the annus horribilis some had predicted.

“We were all expecting a much worse picture for 2009,” he said.

On a monthly comparison, the number of insolvencies stood at 20 in July, 19 in August and 22 in September. Over two thirds (68 per cent) of insolvencies during the period were voluntary liquidations.

However, Ancell is reserving judgment on whether the worst is yet to come.

“I think it will be more interesting when we get the Q4 numbers; this should give us a true reflection of the overall recovery,” he said.

Nitin Joshi, founder of ChannelMoney, said the fall may be masking a rise in personal insolvencies in the channel.

“The main reason the figures are optimistic is because a lot of the directors of the smaller companies are the main creditors rather than the banks being exposed,” he said.

“This means they are ploughing their own funds into the business, and getting loans off their own backs, which means they have more to lose if things go wrong. Therefore they are doing all they can to keep their businesses going for longer because ultimately they don't want to be hit in their own pockets.”