Channel well placed to survive business slump

Consumer sector set to suffer as the economy slows but business-to-business VARs will weather the storm

Nearly 50,000 UK businesses are set to go bust in the next three years, but channel players who focus on business-to-business (B2B) sales will survive, according to accountancy firm BDO Stoy Hayward.

“The IT industry is going to be one of the stronger performing sectors, but those supplying the consumer market won’t fare so well. The strength of B2B demand is good in IT and we predict good growth in IT services, so those selling in the B2B space should survive,” said Shay Bannon, business restructuring partner at BDO.

Mike Lawrence, managing director of VAR Bentpenny and head of the Stroud branch of the Federation of Small Businesses, echoed this view. “The B2B side of IT is going to keep going fairly strongly over the next few years. Whether the domestic market will keep up, I don’t know. Overall, the economy is going to nosedive because people have been keeping it afloat on their credit cards and credit card spending is beginning to wane.

“Resellers selling in the B2B space will survive but I’m not sure about those selling in the consumer space. The box-shifters are the ones that will suffer. If you’re selling a complete service, you will survive. We are doing very nicely at the moment,” he said.

The latest BDO Industry Watch revealed that 15,968 businesses will fold in 2005, or 0.9 per cent of all UK firms. Failures will rise by five per cent in 2006 to 16,773 and by a further 1.9 per cent to 17,086 by the end of 2007 – or one per cent of all UK companies.

In the technology, media and telecoms sectors, business failures are anticipated to fall in 2005 to 1,352 from 1,535 last year, but will rise to 1,407 in 2006.