BusinessBusiness RecoveryDeloitte: administrations set to climb

Deloitte: administrations set to climb

There may be a delayed reaction to the credit crunch that will see more companies folding this year, according to advisers from Deloitte

Deloitte’s study of the latest administration figures has shown that
collapses in the manufacturing and retail sectors fell by more than 40% compared
to the previous year, but IPs may be under a heavier workload in the not too
distant future.

Lee Manning, reorganisation services partner at Deloitte, said: ‘It is
unlikely that these relatively positive administration levels will continue
throughout this year. The data demonstrates that it takes some time for shifts
in the economic cycle to impact administrations. It also suggests that the
downturn may be felt for some time to come.’

Despite the tough economic climate, the number of retail administrations
dropped by 43%, while the number of manufacturing companies folding went down by
40%.

‘While the credit crunch bites hard in the City, with lenders all but closed
for business at the larger end of the market, the pain has yet to be felt as
severely in the manufacturing and retail industries,’ Manning said.

Deloitte breakdowns showed there had been a rise in household related
retailers going into administration.

The troubles of these companies, selling furniture, carpets and electrical
goods was seen by the firm as a yardstick for the wider market. As consumers
start to feel the pinch, discretionary expenditure including house improvements
is one of the first items to be struck off the shopping list, the firm said. A
rise in administrations in the construction industry is another indicator that
consumers and developers are preparing for a harsher climate.

Manning pinpointed the bakery sector as a high-risk area because food
manufacturing has been hit hard by the rise in the cost of foodstuff raw
materials.

‘The drop in manufacturing administrations this year suggests the sector may
be in reasonable health compared with other industries,’ he added. ‘There have
been recent reports, however, of a slowdown in output in the sector, so it may
be that a less positive story lies ahead.’

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