Analyst warn companies could have to make job cuts to survive

VARs warned to specialise or cut costs

A report from Plimsoll Consulting has warned that UK VARs could be facing some difficult decisions during 2008, with job losses amongst the possible outcomes.

It has warned them that they need to either consider specialising, or cut costs in order to survive the problems widely expected to hit the worldwide economy next year.

"With pressure on sales certain to come, some companies will need to cut costs in 2008. Sadly, for most the term ‘cost cutting’ translates into ‘job losses," said David Pattison, senior analyst at Plimsoll.

"Ernst and Young is already offering services to help firms implement cost reduction programs, and more of this will come as the pressure increases."

Small firms, with a turn over of less than £3 million or less, were the companies that lost out on sales the most, however, many still enjoyed healthy margins by carving out a specialisation.

"These firms have managed to do very nicely for themselves by trading in niche products. This trend has been an important factor since 2006, and I see no reason why it shouldn’t continue."

"My advice is to reduce costs as part of a planned long-term strategy, rather than doing so in panic mode. But don’t be too hasty – 2007 was not a bad year overall, with margins averaging 1.9 percent."

He also warned that overall growth of the UK reseller sector had been minimal, at only 0.5 per cent. He also said that some 49 per cent of companies had seen sales decline during 2007.

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