Market watcher Plimsoll split the UK’s top 558 IT resellers into five categories based on their financial performance. Nearly one in six (90) were given a rating of ‘danger’ ­ meaning they must immediately cut costs, slash jobs and turn away unprofitable work to survive.

Most of the channel players in the danger zone are making a loss and taking on ‘alarming’ levels of debt
to cover costs, Plimsoll warned. A further 58 resellers were handed a ‘caution’ rating, due to their weakening financial position. Less than half (265) were deemed to be in a ‘strong’ position.

David Pattison, senior analyst on the project, said: “I think these figures just prove the point of which we have all been aware: that a period of consolidation is long overdue. Bit by bit the weaker players will be removed from the market.”

Plimsoll added that 119 firms may need to shed jobs, and those in the worst shape may be required to slash 30 per cent off their payroll, it added.

Kristian Connor, sales director at reseller AN4 Group, said he expected several of the larger channel firms to sell up this year.

“It is a tough time for bigger players, who face higher overheads and warehousing costs,” he said.

“It has come to a point where consolidation is their only option. A few of the more cash-rich companies will get some bargains over the next six months,” he added.