The IT industry is holding its own despite predictions of a rise in business failures for 2005.
According to consultancy firm BDO Stoy Hayward's Industry Watch report, there has been a steady decline in the number of business failures since 2003, but the number of firms going bust is expected to increase this year.
"Despite this prediction we think the IT sector will continue to perform," said Shay Bannon, business restructuring partner at BDO Stoy Hayward. "The demand from business is good. There has been a great deal of investment in IT by firms over the past year. We don't see any reason why this will not continue."
The report backs up claims from KPMG Restructuring, which revealed that total negative company warnings in the IT sector decreased by 60 per cent( CRN , 21 February) between 2003 and 2004.
However, BDO's report claimed the overall business outlook is not as positive, with increases in inflation and interest rates, and a more volatile global economic environment resulting in an increasing number of businesses failing.
Bannon told CRN the retail and leisure sector will suffer most in 2005 as consumers suffer a confidence crisis due to a slowdown in the housing market and concerns over pensions.
"Consumers are now thinking twice about spending money, and that means they will put off upgrading their home PC and entertainment system for the time being," Bannon said.
Alan Norton, head of intelligence at credit agency Graydon, agreed that the IT market is head and shoulders above the rest.
"The IT market is mature. Costs have been cut and those that are left have longevity. The market has stabilised and the number of insolvencies has been on a downward trend since the dotcom bubble burst in 2002," he said.
Norton agreed that consumer confidence is low, with increased personal debt and the threat of interest rate rises causing a more cautious approach to spending.
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