Euler Hermes: Tough times ahead for public sector players

Trade credit insurer giant warns that firms focusing exclusively on the public sector could be in for a rough ride

Cutting down: The government is planning some serious money-saving moves

Trade credit insurer Euler Hermes has warned of tough times ahead for some IT suppliers due to proposed public sector IT cuts.

The insurer, which has more than £2.4bn of exposure across the industry, has claimed the strategy of some firms to focus almost exclusively on public sector contracts could be their undoing.

William Machtus, Euler Hermes UK representative, said: “Several major players took the strategic decision to move away from the private sector in favour of public sector work and have historically performed well as a result.

“It now looks however as it the good times are going, and this will undoubtedly put a degree of strain on the supply chain,” he said.

Machtus seized on the proposed end of the Becta framework as a particular cause for concern.

“Those that have invested considerable time and resource in gaining accreditation will now find themselves open to greater competition for a smaller number of projects put out to tender,” he claimed. But he said those firms with the flexibility to adjust their cost base should survive the storm.

“But for those carrying high salary bases with technical staff, this may place pressure on cash flow. Fortunately the sector overall is fairly robust, and while there will be losers, there will be winners too,” he said.