The New Year will see a spike in business failures as one in four UK resellers ends the year in financial strife.

That is the verdict of analyst house Plimsoll, which warned that weak firms that have clung on through the downturn may run out of time just as the recovery begins to take hold.

Some 261 of the 1,000 firms analysed were judged to be in financial difficulty.
Almost one in eight (124) were classed as ‘serial loss-makers’ who are in the red for a second year running.

Report author David Pattison predicted the market is also set for consolidation.

“With too many companies chasing weakened demand, it is inevitable that there are likely to be a number of high-profile mergers and takeovers,” he said.

Peter Dawes-Huish, chief executive of VAR Linux IT, agreed that any economic recovery may provide no help to smaller resellers.

“If there is an upturn and if there is no credit in the channel, it will place a strain on resellers to service business that might come in,” he said. “That is when a lot of smaller firms will flounder.”

Alex Tatham, commercial director at distributor Westcoast, agreed that January would witness a definite spike in bankruptcies.

“But it will not be the economic climate that causes this, but the downturn you get in cashflow every December,” he said.