Company failures at two-year low
Optimism in IT sector as report reveals fall in number of businesses collapsing
Following several years of doom and gloom, yet another market watcher is injecting sunshine into the industry by predicting a positive 2004 for the IT sector.
According to the Industry Watch report by BDO Stoy Hayward, business failures have fallen to their lowest level in two years, as business-to-business activity is set to overtake consumer spending over the coming year.
The firm reported that the number of companies collapsing fell to 4,130 in the third quarter of 2003, with 17,900 firms folding during the year, compared with 19,928 in 2002.
Shay Bannon, business recovery services partner at BDO Stoy Hayward, told CRN that the technology sector, along with the manufacturing sector, is showing clear signs of recovery.
"Technology has been doing worse than other sectors for the past couple of years but we are predicting a 15 per cent drop in failure rates in the first half of this year," he said.
Bannon predicted that by 2005 the failure of technology companies will be at its lowest level since 1996.
He added that the sectors set to suffer most in 2004 will be leisure and retail, as consumers are hit by increasing taxes and higher interest rates.
BDO's report follows a raft of similarly positive reports from other industry watchers, including one from the Economist Intelligence Unit that found almost 60 per cent of UK senior executives plan to increase IT spending this year.
However, Paul Lloyd, business development director at profit enhancement firm Profit Focus Group, was more cautious.
"A lot of people are talking the industry up, but I'm not sure how that translates into real business," he said.
"The corporate marketplace has to start updating its systems after so long surviving on old technology, and a lot more SMEs are going online and need IT equipment. That is positive news for the channel.
"Although in general terms I can't see the industry getting any worse, I still think there are a lot more resellers that will go out of business this year."