The continued shift to services has cushioned the channel from feeling the true pain of the UK’s sluggish economy.
According to the latest Office for National Statistics (ONS) figures, GDP rose by 0.4 per cent in the first quarter of 2016, a decline when compared with the 0.6 per cent increase in Q4 2015.
The ONS says this is not due to the so-called Brexit effect, but weaker global markets in general. On a more positive note, GDP was 2.1 per cent higher in Q1 (January to March) 2016 compared with the same quarter a year ago.
However, the services sector, which accounts for over three quarters of GDP, compensated for output drops in the three other economic staples: production, construction and agriculture. Services grew by 0.6 per cent in the first quarter, while construction fell by 0.9 per cent, agriculture by 0.1 per cent and production by 0.4 per cent.
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said a number of factors were hitting smaller firms. “It is concerning to see the slowdown in growth in Q1 this year,” he said. “This sluggish performance in the UK is being compounded by uncertainty over the health of the global economy.”
He added that recent FSB research had found small business confidence at its lowest level since 2013. “Small firms are dealing with a series of challenges including adjusting to the new National Living Wage, and pensions auto-enrolment,” he said.
“In this climate, our members are looking to policy makers to focus on reducing barriers to enterprise and creating the right environment for small firms to grow.”
Mark Evans, commercial director at VAR Imerja, said the channel was more resilient than some industries because many had made the move to services early.
“A slow in GDP growth is never good news, but companies that have implemented sensible long-term strategies will be less affected by this in the short term," he said.
"Those in the channel, like ourselves, that have moved away from simply reselling products and towards a focus on really adding value, through the likes of managed services and innovative IT solutions, are more resilient to fluctuations in GDP growth rates thanks to more reliable revenue streams and long-term contracts.”
Justin Harling, managing director of CAE, felt that the EU referendum could cause temporary difficulties for some sectors over the summer as uncertainty over the outcome will have a short-term impact on confidence.
“Pushing business through the early part of the summer is going to be challenging," he said. "But the biggest worry is the GDP per capita. We are the fifth-largest economy in the world, but we ranked 27th on the list for GDP per capita. That is not very good.”
But he agreed that the channel is in a strong position, and should be driving growth.
“From our point of view, we are not seeing a similar slowdown in growth and our industry is a sector that is performing strongly from a services perspective,” he said. “We are the industry that should be providing solutions for how the economy can grow. If we continue to invest in these solutions, there is no reason why we cannot continue to drive the economy. A weakening economic climate is no excuse to underperform.”
Softcat CEO Martin Hellawell said that minute fluxes in the economy do not really make a difference to his firm.
“Ultimately, we are talking about pitiful levels of growth. It doesn’t make that much difference as even in the recession we were growing at higher levels than that. There are a lot of businesses out there that are spending money on IT, and while economic growth would be the icing on the cake, it doesn’t mean we all hide under the table when growth isn’t as high as expected," he said.
"Overall, growth levels are positive for the UK in the second half of the year, but of course the elephant in the room is Brexit. If there was 'out' success, I think the second half of the year would be unclear, but if there is a 'remain' result, there will be general relief in the economy.
"So does it matter that much? It is helpful if there is GDP growth, but does it really affect us? No, it doesn’t. Our growth is going to come from taking market share and doing a better job than our competitors. And there is plenty of opportunity there."
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