Double dip recession hits channel

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VARs based in the capital buffered from full effects

The Office of National Statistics has claimed that the country continues to be in double dip recession, but VARs based in the capital are being buffered from the effects of a reduction in business spending.

The ONS reported grim figures today, highlighting a 0.7 percent contraction in the economy in the second quarter.  Of course it could be argued that the country has effectively been in the clutches of recession since 2008, but after three consecutive quarters of falling GDP experts are saying we are mired in a double dip recession.  Chancellor George Osborne is labelling the results “disappointing”.

The drop is larger than was expected, and amounts to a more substantial decrease than had been seen since the slight revival seen throughout parts of 2010.  The total decrease for the second ‘dip’ now totals a 1.5 percent GDP contraction.

In typically British fashion the ONS lay much of the blame on the weather and the monarchy, with the record rainfall levels and an extra bank holiday for the Jubilee compounding the difficult economic environment.

It was the construction industry that came off worst, with a 5.2 percent contraction, though all areas saw decrease to some extent.

The view from VARs operating in the channel is that the situation remains difficult, though firms located in the capital are likely to buffered to an extent from a lack of spending as a result of the recession.

“I think definitely a lot of companies have struggled from a reseller perspective,” one VAR told ChannelBiz, “but the ones based in London, like in many industries, haven’t felt the pinch as much.”

We were told that some sectors were also likely to be buffered from sudden, quarterly decrease as reflected by the ONS stats, though the wider community is suffering.

“From our perspective, although our growth has slowed compared to previous years we have still had a good year, because most of our customers are based in the City and they can’t really afford to not invest in IT.

“But there has been a downturn for companies operating in verticals outside of professional services, so outside of insurance, finance or legal.”

With a smaller customer base, this particular VAR had not seen any “sharp decrease” through any quarter this year, and “especially not the second quarter”.

Another VAR said said that the recession is still being felt, there has been no sudden drop off in customer interest.

“Obviously customers are watching their money and watching their spend as they always do, but it has been like that for two, three years now.

“It’s business as usual.  From our customers’ base, people are watching their money, but we are still seeing large projects go through in the last couple of months.

He points out that the feeling is largely optimistic in the software sector particularly, with Microsoft’s big release coming up.

“There are things coming out at the end of the year with Microsoft update, people are already looking into Windows 8 and Office 2013,” we were told.

“They are already discussing this, so there is certainly initiative to spend there.”


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