Business confidence remains low
Market watcher predicts revenue falls over next 12 months
Widespread decline in UK business confidence could affect IT vendors and the channel following predictions of a revenue and profit slowdown for the coming 12 months, according to a report by KPMG.
The number of business expecting revenue to increase in the next 12 months declined by 12 per cent to 53 per cent, compared to the same period last year. In the survey of 396 UK manufacturing firms, 24 per cent also expected profits to decline.
Philip Davidson, head of restructuring at KPMG, said: "China, outsourcing and an increase in the cost of raw materials are adding to the strain. Price increases can no longer be passed into the channel in the IT market, so vendors will have to absorb more of the cost themselves," he said.
Although 57 per cent expected some growth in business activity and new orders over the next 12 months, KMPG said the increases expected were the lowest observed over the last three years.
KPMG's report mirrors a recent report by accountancy firm BDO Stoy Hayward that said business confidence had fallen to its lowest level since October 2003 and that UK economic growth was also set to slow (CRN 13 June).
"SMEs will be the hardest hit because of their position in the sales channel, where as those supplying to a larger customer base and with less competition can more easily pass costs onto their customers," added Davidson.
John Griffith, UK country manager of SME software and consultancy vendor Kapow Technology, said: "In the IT industry we are set for an improvement. There will be a small increase in margin, but I wouldn’t expect a decrease.
"Bigger organisations will continue to be best placed to pass costs onto the end-user, but that is just economies of scale," he said.