Being the chancellor of the exchequer has proved a thankless task over the past few years, but George Osborne claimed earlier this month that the economy has “turned a corner”.
With one per cent growth forecast for the rest of the year it will be more a case of breaking open a bottle of cheap plonk rather than the bubbly, but are things looking up? Or is it just a flash in the pan?
The Tory chancellor is certainly crowing about the economy – speaking to a room full of academics, thinktank members and business leaders earlier this month he said the Conservatives had “held [their] nerve when many told [them] to abandon [their] plans”.
The UK’s economy is on the up he said, but he warned that we must not take anything for granted and he indicated that more tough choices will have to be made after the next election to find billions of pounds of further savings.
But despite all the grandstanding, the UK economy is still three full percentage points smaller than it was before the financial crisis struck in 2008. Here some leading channel players share their thoughts on the situation with CRN.
Barrie Desmond, marketing director of pan-European VAD Exclusive Networks, said being confident was the key to recovery.
“Over the past few years we have definitely seen overly scrutinised projects and the biggest problem has been confidence,” he claimed. “You really begin to see more macroeconomic indicators when people are more positive.”
But he warned that the increase was so marginal, caution is still warranted: “You have to look at the fact that it is a minute percentage increase – we are not talking about a 10 per cent jump here – but if it helps confidence, it is a good thing.”
Mike Pullon, chief executive of specialist distributor VARlink, was also optimistic. “Our August order intake was up 29 per cent, and for the financial year ended August 2013, the top line was flat and the bottom line was better. However, we have found the holiday period incredible – the number of people not at work was really noticeable and it appeared decision makers were away, meaning projects stalled as people were not there to sign them off.
“But now that schools are back and the holiday period is over, it is like somebody turned on the tap again and everyone has gone into business mode, with projects being signed off like somebody has breached a dam. We might need to get through to Christmas to see whether or not these growth levels represent the new norm. If we see the same sort of numbers in October and November, I will feel sure that this is not just a dam being relieved.”
Another positive voice belonged to Terry Betts, chief executive of VAR CCS Media, but he added that the pessimistic national press was no help to businesses. “Sometimes there has been a lot of bad press where there should not be and that doesn’t help the situation,” he said.
“However, we have been getting refreshes coming through and some very big deals. We had a cracking August – up 28 per cent on the previous year – and it appears customers have freer cash because projects are coming through quicker than before.
“My gut feeling is that things are getting better, but it is still quite fragile. If bad news keeps coming, and the national media keeps picking on all the negatives, it can have a real effect on confidence. Another sign is that it is becoming harder to get new staff – when things are tight, people are more willing to change jobs, but now there is more confidence around, people are sticking where they already are.”
Andy Dow, marketing director at Computer 2000, said IT had survived the economic downturn well. “The one key thing is that IT as a whole has weathered the recession better than most industries. The technology mix has changed, but the IT sector has outperformed the economy and people keep investing in IT. Confidence in the economy is definitely improving, and confidence in IT has always been high.”
But Richard Britton, chief executive of cloud integrator CloudSense, said the government needs to do more to promote IT.
“Consecutive governments have not paid enough attention to the role of IT in the economy, with the result that the UK is a net importer of technology rather than an exporter. Issues such as the availability of lending, tax competitiveness and rising costs have not yet been dealt with effectively enough and are holding back UK businesses competing in a global market.
“To be a global leader, the UK needs to change its mindset from catching up with other countries to being bold and visionary, delivering world-leading technology. In telecoms the government trumpets 4G and fibre broadband which will still leave us behind other countries,” he said.
James Kight, managing director of VAR Printerland, said a strong SMB market had helped.
“The UK economy has been in recovery for a while, and that robust growth in the SME market – a key area for us – has sheltered the reseller channel from the worst of the recession. Although the market has tightened, there are still plenty of opportunities for companies that are willing to adapt to new business realities and face challenges head on. As the economy continues to improve, firms with a clear strategy for capitalising on the new realities of the market will continue to thrive.”
Andrew Turnbull, head of ICT for NG Bailey’s IT services division, said purse strings were loosening. “Businesses have refined the art of surviving in a recession, and many are leaner and more prudent than ever with their spending. But technology has changed as well – the restrictions that the recession placed on businesses’ ability to invest simply accelerated the pace at which technologies such as cloud and virtualisation were developed. Now we have a situation where our customers are ready to invest again – but, with the rise of cloud and as-a-service computing, they don’t actually need to.”
And Greg Harris, founder of specialist player Cloud Distribution, added: “At Cloud we are seeing things progressing at a much faster pace. Our pipeline is strong and we are seeing great demand for productivity and operationally more cost-effective solutions as organisations strive to do more for less.
“Rising concerns around the risks posed by cyberthreats have also generated strong sales of our cybersecurity offerings, especially in the mobile space. Although a full economic recovery is still some way off, at Cloud Distribution we are definitely seeing green shoots coming through.”
Moneylenders appear more confident
According to Sean Duffy, managing director and head of TMT at Barclays: “Businesses are increasingly moving towards a smarter, more efficient way of working in order to optimise costs and reduce CapEx. While investments in IT are still being made, the focus is shifting from replacing hardware to building out more up-to-date and scalable IT architectures, cloud computing and software as a service.
“Hardware has long been a low-margin business for the channel, and we have been seeing companies trying to broaden their offering and move towards a service model for some time. Businesses are watching what they spend as they continue to worry about the ups and downs in the economy, and the channel is doing the same.”
1% - Amount the economy is forecast to grow in 2nd half of 2013
29.8m - Number of people aged 16 or over in employment in Q2 – an increase of 69,000 on the prior quarter
7.8% - Unemployment rate
0.1% - Amount by which UK employment rate increased, to 71.5 per cent on Q2 (source: ONS Aug 2013)
22,339 - Number of shops standing empty on UK high streets (source: The Local Data Company)
2.2% - Amount house prices are set to rise this year (source: RICS)
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