Vendors suspend tech orders as Brexit slaps Brit pound
Customer uncertainty, short term pain predicted, will be no jam tomorrow
BREXIT If there is one thing the IT industry despises it is uncertainty and there was lashing of the stuff poured across the UK following the Brexit vote.
Most major vendors already came out in favour of the Remain camp - including Microsoft, IBM, HPE, SAP, EMC, Cisco and many others - the result was so unexpected for the community they had no prepared statements today. Microsoft refused to comment.
But suppliers in the sales networks of these vendors talked about the potential consequences of Brexit.
Frank Salmon, CEO at CMS Distribution, told us he was braced for “turbulent” market conditions for the remainder of the year, adding, “for us, this is nothing short of a disaster”.
He said three of its vendors had already “suspended order taking” this morning while they review the impact of the currency fluctuation - Sterling fell to a 31-year low versus the US dollar after the vote but has recovered slightly.
“There is a 10 per cent difference on the prices we have already quoted customers… Customers will review orders as price go up. We have a meeting this morning to discuss the short term implications,” he told us.
The reintroduction of trade tariffs with the other 27 countries in the EU posed a potential pitfall for UK businesses, Salmon warned. “It turns the clock back 30 years”.
CMS recently bought distributor Widget, gaining a foothold in the Netherlands. “We started a new strategy to build out business based on the strength of our financial resources in Sterling. We’ll have to review that.”
Distributors concurred that prices will have to rise based on the current difference between the British Pound and US dollar, existing orders will be honoured at prices they were quoted at.
Gartner has re-forecasted 2016 spending on the back of Brexit. It has said both discretionary spending and protect spending will be three per cent lower than previous projections. Why? Uncertainty.
With UK PM David Cameron already revealing he is going to resign by October, this heaps further caution on the UK economy.
Mike Norris, chief executive at Computacenter, agreed the vote could “create a malaise where spending becomes less certain, and that is bad for the whole of the UK economy. No one will be immune to that.”
“I worry about the UK economy in the short term, in the long term I worry about access to skills and cost of skills,” he said.
Colourful character Norris said the IT industry is “very different to picking strawberries” - the logic being if the cost of picking fruit rises the cost of the fruit rises. “If the cost of delivering IT rises, it will be done remotely”.
“This may well drive more outsourcing and offshoring,” he said.
Computacenter has 5,000 staff in Germany, 2,000 in France, 800 people in Spain and 250 in Belgium. Last year it lost £2m in forex rates and so a weaker pound will mean more profits where the money is repatriated.
The National Outsourcing Association said its members has voted to remain in the EU in polls stretching back months. “It is vital now that our political and business leaders do everything they can to restore and maintain market stability as a new relationship with the EU is established”.
Lawrence Jones, the big boss at UKFast, was yet another business figures disillusioned by the vote. He used data regulation as an example of why leaving the EU was negative.
“Within the EU we are in an incredibly strong position and we are held to the highest privacy standards,” he claimed. “This helps us build confidence and to trade win this valuable currency. Personally I don’t trust our government to keep the same standards and inspire the same levels of confidence.”
“The Snooper’s Charter is already eroding confidence in UK data and losing the influence of Brussels may have a further negative impact,” he added.
Contacts in the private equity circle are, as ever, looking at Brexit as an opportunity. One said it was looking more like a buyer’s market for anyone sat on a pile of cash.
“The whole stock market is off already so publicly listed companies are cheaper, and access to debt might tighten as banks will sit on their hands for a while,” he said. ®