Euler Hermes is viewing resellers that have grown reliant on the public sector purse with some caution and has already taken the knife to one mid-sized business that is heavily focused on the government space.
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The credit insurance sector has stabilised according to Euler UK chief executive Fabrice Desnos, which is underwriting £4bn worth of business in the channel, up by single digits on last year, and agreeing 80% of new requests for cover.
However, while Euler is predicting a small drop in corporate insolvencies worldwide for 2010, UK government austerity measures are giving cause for concern locally.
"Many [reseller] businesses used to be 60% private and 40% public, [but] in the last two to three years a lot of them have become the opposite and that is the biggest worry," Desnos told MicroScope.
He did not foresee a flood of casualties as many IT resellers learnt lessons in the dot com bust and acted prudently in this recession.
"We expect to see pressure on margins but there is greater flexibility within businesses and they are proving themselves to be resilient. We expect casualties at the lower end but we don't foresee a big problem," added Desnos.
The extent of the public sector cuts will be revealed next month when the government publishes the autumn spending review,
In advance of that Euler has already wiped £1m worth of credit insurance from one medium-sized firm that it considered was too great a risk, but MicroScope has decided to not add to the company's issues by naming it in isolation.
The boss of the business said it was projecting profits for the year ahead and continued to enjoy the support of key suppliers and other credit insurers, claiming Euler had over-reacted to the situation.
Market watchers reckon Euler and other insurers will be closely monitoring the financial results of businesses in the public sector and anticipate further cuts to credit insurance as the protracted economic recovery continues.