Digital set to weather the storm
Jul 3 2008 by Andrew Mernin, The Journal
AS economic turmoil continues to cause soaring levels of business failure across almost all industries, the region’s digital sector could be set to weather the storm.
Accountant and business adviser BDO Stoy Hayward* says there will be little change in the number of technology business failures in 2008 and 2009, despite the economic downturn.
According to its latest IndustryWatch research, the number of business failures for the technology, media and telecoms sector in 2008 is expected to fall from 1,428 in 2007 to 1,410 in 2008.
BDO says there will be a less than 1% rise in failures to 1,428 in 2009, with the number falling to 1,356 in 2010 – the lowest level since 1997.
Meanwhile, the report predicts an increase in business failures next year in almost every sector including manufacturing, wholesale and retail but highlights the resilience of technology, media and telecoms.
Failures in the retail sector are expected to rise by 7% this year while a weaker dollar discouraging trips to the US is likely to see failures in the travel industry rise.
The study says: “Continued advancements in technology, media and telecom products and services will continue to increase international demand.
“Cost improvements will also protect the sector’s profit lines, leading to declines in business failures.”
Sally Waterston, founder and financial director of Durham-based IT consultancy Waterstons, believes the sector’s ability to cut costs through improved technology will see it survive the tough economic climate. She said: “The technology sector is in a good position to thrive in spite of the economic downturn. We have seen within our customer base a strong initiative to use technology to reduce costs and to make the applications, processes and infrastructure leaner and more cost-effective.
“In the North East there are still many manufacturing companies and the opportunities to support them and to introduce new, leaner and greener technologies.
“We are finding that our customer base is expanding south as we can provide highly- skilled resource and expertise at a competitive cost without the high overheads which burden companies in and around London. This is a good time to be in the North East and in the technology sector.”
According to Mick Keeble, business development director at Newcastle IT firm Croft, diversified technology companies will be well protected against any economic downturn ahead. He said: “We’ve got enough diversification in the services that we provide to work around any downturn or recession.”
Phil Branston, an IT expert from Newcastle brokers Wise Speke, said: “IT companies these days are an established part of the economy. So in the current challenging economic conditions, many of the region’s IT businesses are well equipped to outperform other industry sectors.
* BDO Stoy Hayward is the UK member firm of BDO International, the world’s fifth largest accountancy network, with more than 600 offices in over 100 countries.
Click here to read the full BDO report.
