Public cuts leave IT suppliers in the cold

Government cuts have led to a surge in insolvencies and profit warnings among public sector IT suppliers, ranging from leading IT giants to one-person IT firms working part-time.



Following the state's order to impose contract cancellations and de-scoping to yield hefty savings, 168 firms supplying the public sector collapsed in this year's first half.



This represents a rise of 47 per cent, said Wilkins Kennedy, whose new list of troubled IT giants includes RM Group, the schools IT firm, and C&W Worldwide.



The duo, which both recently issued profit warnings, were said to reflect the problems facing state IT suppliers, in that each have had their workloads hit by the cutbacks.



Alongside loss of work, the leading cause of insolvency for the IT suppliers, who included 'one-man' bands, was their tax or VAT liability, Wilkins Kennedy said.



However despite the increasing number of troubled public sector suppliers, total insolvencies in the first six months of the year fell by five per cent, the firm found.



Less positively, explained its director Anthony Cork, "more pain" for firms facing the public sector seems inevitable, in the shape of the Spending Review in October.



Speaking to CUK, he warned: "Anyone who supplies services to government/council bodies is at risk due to the cutbacks announced in the last Budget."