Public sector spending will slow down next year, but health and education will remain lucrative for resellers, market watcher BDO Stoy Hayward has predicted.
In its latest Business Trends Report, BDO predicted that the Chancellor Gordon Brown will miss his public sector net borrowing target of £31.9bn this year.
Peter Hemington, partner at BDO Stoy Hayward, told CRN: “The real crunch is going to be in the public sector, as Gordon Brown has said that spending in this area will stablilise by 2010, so I think the public sector could be a difficult market to be in over the next few years.
“Brown has said that spend in education and health will be protected – it will be other areas like local authorities that will suffer,” he said.
This could mean public sector VARs will look towards the private sector for future work, he added.
“The private sector isn’t doing badly – it is just a bit slow. Firms are still growing at 2.5 per cent in the private sector so things shouldn’t be too bad for resellers in the private sector. There will be a continued reasonable pace of capital spending on IT equipment next year,” said Hemington.
Pete Mistry, technical sales consultant at public sector VAR Eclipse Group, said: “I visited a public body last week and the first thing they said was that their budget had already been slashed by half for 2006.”
“Our sole business isn’t public sector – we do quite a bit in the corporate arena – but we might have to look to do more in the corporate sector if public sector spending slows next year,” said Mistry.
Pete Renson, director of public sector VAR NRJ Consulting, said: “We do a lot of work with local authorities. I welcome the challenge of them having less money to spend as it means they will have to do things smarter which is where we can help by offering them our cost-saving management solutions. I think it would be unhealthy for any reseller to be in only one market which is why we also have a private sector side of the business.”
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