Share prices of UK resellers get boost in wake of general election

Boris Johnson’s Conservative Party gained a massive majority in this year’s election which he said is a mandate to “get Brexit done”

Share prices for the UK's publicly listed resellers surged overnight after the general election result delivered a historic landslide victory for Boris Johnson's Conservative government.

The Conservative Party has so far secured a comfortable majority of 78 in last night's general election, with 649 out of 650 seats so far declared. The party has added 66 seats to its 2017 total, while the Labour Party has lost 42 seats.

The pound enjoyed its biggest rally in almost three years after the Conservatives secured the majority. Sterling leaped by more than three cents against the US dollar to $1.35 - its biggest rise since 2017.

The general election result has also had a positive impact on the UK's largest publicly listed resellers.

Hatfield-based Computacenter, the country's largest reseller with £1.62bn in revenues, saw its share price spike by almost six per cent overnight, as election exit polls suggested a huge victory for prime minister Boris Johnson's party.

Similarly, the UK's second-largest reseller - Softcat - saw its shares jump by more than five per cent overnight off the back of the general election news.

The election result has had a positive impact on other listed UK channel firms. BT, which has fended off fears of nationalisation after Labour leader Jeremy Corbyn's defeat this morning, saw its share price rocket by as much as 10 per cent to 206.8p as its shareholders celebrated the news.

Services giant Capita saw the largest increase out of the UK's publicly listed channel firms, with its shares growing by as much as 13 per cent overnight.

Brexit has mired the IT channel over the last few years, with vendors, analysts and channel bosses pointing to uncertainty around the UK's future relationship with the EU.

Channel bosses including Softcat's Graeme Watt and SCC founder Sir Peter Rigby have sounded caution about what impact Brexit might have on their businesses.

But with a comfortable majority in government, the general election result has lifted investor confidence in channel firms. A Conservative majority will likely make it easier for the government to push Boris Johnson's Brexit deal through parliament, with many believing it will help reduce uncertainty on Brexit for many business leaders.

The share price boost after the general election comes after several years of soaring valuations for resellers. Canalys' CEO Steve Brazier made valuations a central theme at this year's EMEA Channels Forum in Barcelona, claiming that reseller valuations have more than tripled in the last five years.

Similarly, Kelway founder Phil Doye recently said that his firm would have sold for more than £1bn if it still existed today.

The IT sector reacts

The newly elected Conservative majority government is expected to bring "certainty and stability" to businesses in the IT sector after several years of stagnation caused by Brexit.

Boris Johnson's party secured a landslide victory the general election, winning 364 seats, with only one seat left to fill at time of writing.

Kelvin Kirby, CEO of Technology Associates, told CRN that the results are "hugely positive" for UK businesses as it now means that policies affecting the IT industry will no longer be delayed by debate in parliament.

"It will now allow inward investment. I think we will see an explosion in companies moving ahead with adoption of services," he said.

"I think there's been a lot of uncertainty in the past few years and that's held companies back on making decisions. I think things will really start to motor in 2020.

"It also means that there's no debate about policy decisions that may affect the IT industry; a decision may be made whether we like it or not, but at least a decision is going to be made - it's not like it's going to be held in limbo ad infinitum."

The removal of uncertainty about the Brexit deadline of 31 January will provide stability to businesses to invest in their own infrastructure, systems and software, he added.

Kirby's optimism was echoed by Mike Cherry, chairman of the Federation of Small Businesses (FSB), who stated that the results should "bring stability back to the economy" and expects a pro-business Budget at the beginning of February.

"The restoration of small business confidence and trust in politics rests on seeing the Conservatives' pledges to us swiftly enshrined in a programme for government," he stated.

"It's now time to turn kind words on bread-and-butter issues facing the small business community into tangible action.

"This government needs to deliver a business-friendly Brexit. That means one that protects the three Ts: trade, talent and a proper transition. The third of those is absolutely critical. We have to avoid a scenario where we suddenly crash out of the EU with no time for small firms to prepare for what's coming next."

Channel players used Twitter to give their thoughts on the results. Former Dragons' Den investor and head of now-defunct cloud player Outsourcery Piers Linney commented that the future of the British economy lies in the hands of its 5.7 million businesses.

Dell EMC channel stalwart Sarah Shields also tweeted her thoughts on Boris Johnson's win.

Software and IT services (SITS) suppliers will be breathing a sigh of relief at the lifting of the Brexit impasse, according to Dale Peters, analyst at TechMarketView.

The promises made by the Tory Party during this election cycle to invest in public sector services, including recruiting more police officers and nurses, indicates that the UK is looking at a period of increased investment, he noted.

"The truth may well be hidden behind some creative use of data, but it is clear that we are entering a period of renewed investment in public services.

"Clarity over Brexit, greater investment in public services and longer-term budgets will be welcomed by SITS suppliers.

"New market opportunities will be created as government departments and agencies start work on Brexit-related modifications to systems and services, and the wider public sector will have more confidence to commence digital transformation programmes.

"There are still many challenges to come, and there is little doubt there will be more twists and turns in this tumultuous period of politics, but now we have to make the best we can out of the situation."