UK's top 400 resellers and MSPs grow 4.5% to £23.1bn

UK's 400 largest channel partners squeaked out growth in their latest years, despite Covid, latest CRN Essential report indicates

The UK's top 400 resellers and MSPs defied Covid by growing their collective revenues by 4.5 per cent to £23.1bn in their latest years.

That's the headline finding of the latest report for CRN Essential subscribers, VAR 500.

CRN Essential subscribers can view the full report here. A preview version can be viewed by all here.

Representing CRN's most comprehensive attempt yet to map the UK channel, VAR 500 ranks and profiles the top 400 UK resellers and MSPs by revenue, as well as an additional 100 resellers and MSPs by headcount.

Despite the vagaries of Covid and Brexit, the top 400 squeaked out collective growth of 4.5 per cent in their most recently filed annual accounts (as of 25 January 2022).

But that's down on 7.8 per cent and 12.4 per cent growth registered by the top 350 in the previous two years, with growth driven almost exclusively by the market's larger players.

Major themes from VAR 500

• Covid takes a toll on top line

The top 400 grew, but at a reduced rate, with growth overwhelmingly driven by market giants such as Softcat, Bytes and Computacenter. Some 192 of the top 400 posted a top-line contraction.

Print and AV specialists were the worst hit, with the 32 and 20 specialists we track in these markets seeing their collective sales tumble by a respective 15 and 22 per cent. Several saw their top lines halve.

• Flocking to furlough

Further evidence of the carnage wrought by Covid can be found in the collective £64.3m furlough/government grants claimed by 152 of the top 400 in their latest years. Only 18 companies explicitly said they made no use of the Coronavirus Job Retention Scheme.

• All's fine at the bottom line

Despite this turbulence, the VAR 500's profitability held up - and even marginally increased - thanks to a combination of lower travel and entertainment costs, prudent cost management and the cushioning of government support.

Of the 389 firms who reported the relevant data, median net profit margins rose marginally, from 2.6 to 2.89 per cent.

• Recurring revenue race revs up

By throwing one-off project sales into disarray, the pandemic has reinforced the ‘Holy Grail' status of recurring revenues, with countless examples of VAR 500 firms accelerating their shift to managed services and as-a-service.

• Big get bigger and the small get niche

In a related trend, the bifurcation of the market between large, volume resellers and niche services-focused outfits has been turbo charged by the pandemic.

This is shown clearly by the contrasting growth rates of each size bracket. While double-digit revenue hikes at the likes of Computacenter, Softcat, Bytes and the big etailers underpinned a 6.3 per cent collective annual top-line increase among the top 100, those ranked from 201-300 and 301-400 saw their collective sales shrink by 4.0 and 7.1 per cent respectively (with those ranked 101-200 growing by a modest 1.4 per cent).

• Channel chameleons

Diversification and reinvention were the watchwords for many VAR 500 firms whose core business crumble amid repeated lockdowns. Chief among these were the AV and print specialists, many of which added new strings to their bows in areas including unified comms, IT services and workplace services.

• Post-Covid recuperation

According to Forrester, the UK tech market is set to rebound by 1.6 per cent to £184.9bn in 2021 having shrunk by 7.9 per cent in 2020, with growth forecast to accelerate to 5.9 per cent in 2022.

Although VAR 500 firms gave contradictory feedback on current market conditions in their latest annual accounts, many reported signs of green shoots or a rebound in projects put on hold in 2020 and early 2021.

About the VAR 500

In the biggest leap forward since we began mapping the UK channel skyline in 2011, this year our flagship report has moved up from 'VAR 350' to ‘VAR 500'.

In addition to the 400 revenue-reporting channel partners profiled at the front of the report, we have added a new section at the back counting down (or, strictly speaking, up) the 100 largest outfits who don't divulge their top line. Their headcount ranges from 120 to 32.

With estimated revenues of nearly £25bn, together these 500 resellers, MSPs and niche consultancies represent a sturdy front line standing between the vendors and the end-user budgets they are so eager to unlock.

Collectively, however, they hold the key to UK channel success for all the major IT hardware, software, cloud, comms, print and AV vendors, from Adobe and Apple to Zyxel and Zoom.

For more information about VAR 500 and CRN Essential, please contact [email protected]