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The DTI insolvency statistics released today (05/05/06) show a year-on-year rise in liquidations amongst UK manufacturers.

The DTI has today released Q1 2006 insolvency figures and full year 2005 data by industry (05/05/06). The data shows total liquidations for the manufacturing industry in England and Wales are up on the year before. Chemical manufacturers have been hardest hit with a 62% rise in insolvencies.

Commenting on the figures, Jane Lodge, head of manufacturing at Deloitte said:

"Although there have been some signs that the manufacturing sector is rallying this week, UK manufacturers continue to face a threat to their competitiveness from escalating energy costs which could drive liquidations in the manufacturing sector even higher.

“UK energy costs are now amongst the highest in Europe. Coupled with increasing raw materials prices and quite strong growth in wage costs, this has pushed manufacturers’ total weighted costs up at fairly rapid rates in recent months. Less competitive industries or industries where demand is high are more likely to be able to pass on the price increases.  However, fixed price contracts mean manufacturers are not always in a position to pass these mounting costs on to their customers.“

Dominic Wong, a Reorganisation Services partner at Deloitte said:

“There is no doubt that, as a consequence of both increased energy and raw material prices, UK manufacturers face significant challenges. Manufacturers should seek advice before it is too late - insolvency in many cases can be prevented and where costs cannot easily be passed on, businesses need to look to other areas of cost reduction and improved working capital management.

“Identifying alternative fuel strategies and increasing fuel switching flexibility can reduce energy costs in the medium term, but for the smaller firms there maybe a challenging future ahead. Inevitably some businesses will struggle to survive.”

- Ends -

Notes to editor

The most recent figures for liquidations by industry are for Q4 2005. This is due to a time lag in data collection.

Manufacturing company liquidations: (Sourced from DTI) http://www.insolvency.gov.uk/otherinformation/statistics/200604/presswithtables.pdf

	2004	2005
Food, drink and tobacco	38	43
Chemicals	21	34
Metals and engineering	630	591
Textiles and clothing	168	172
Timber and furniture	69	85
Paper, printing and publishing	291	253
Other	379	441
TOTAL	1,596	1,619

Dominic Wong is an expert in this field and is available for commentary on the significance of the latest figures.  Please call to arrange.

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