Reseller insolvencies have ramped up considerably in 2011, hitting levels not seen since 2002, according to Graydon’s latest figures.
In the first six months to June 2011, a total of 175 firms went to the wall in the UK channel, through a mix of voluntary liquidation, compulsory liquidation and receivership.
The months of May and June 2011 saw a particularly high number of firms go bust – 32 and 44 respectively.
Of those in May, 16 were voluntary liquidations, four compulsory liquidations and 12 had a receiver appointed. June saw 28 firms go into voluntary liquidation, six into compulsory liquidation and 10 had a receiver appointed.
Compared with previous years, 2010 saw a total of 269 firms go out of business, 2009 saw 256, 2002 saw 413 go bust and 2003 saw 345, Graydon said.
Alan Norton, head of intelligence at Graydon, said: “The figures speak for themselves. The amount of firms going out of business in the first six months of the year are at a level not seen since 2002/2003.
“This is likely to continue into the second half of the year as well,” Norton added. “There are so many pressures out there at the moment, such as government funding cuts, consumers running scared due to petrol, fuel and food price rises, and also more firms concerned about job security in the market. People just aren’t spending as much on IT as before.”
But Norton said the most worrying trend was the fact that it is more established names that are succumbing to the tough economy.
“Traditionally there were a lot of high-risk new entrants coming into the market which were more likely to go bust, but now we are seeing the more established brands suffering with the likes of PARS, Mesh and Micro Direct some of the most high-profile victims recently.
“It goes to show that those firms that haven’t actually changed their business models and are still not adding value, are going to have a difficult time,” he said.
“Many of these firms cut back on costs during the last economic downturn and managed to survive, but without changing to a more value-based strategy, they will continue to struggle.”
Nitin Joshi, founder of ChannelMoney, agreed the older businesses were most at risk.
"There are a number of firms out there being undercapitalised that haven't got enough business to sustain themselves and this is definitely having an effect in both the public and private sectors," he said. "But the channel firms that have to worry the most are the ones that have been trading for five years or more. They are the ones with the established client base whose spend has declined dramatically."
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