Contact: James Igoe
Deloitte
Public Relations
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Latest analysis of administration figures by Deloitte, the business advisory firm, has shown that in the first half of this year there has been a 20% decrease in administrations in the manufacturing sector compared with the same period in 2006. In the first half of 2007, there were 297 administrations compared to 371 in the first half of 2006.
Lee Manning, reorganisation services partner at Deloitte, commented that these figures should be treated with caution: “Over the last couple of years we have seen so much liquidity chasing a scarcity of quality deals. This is now changing, and with interest rates rising we will see an acceleration in the rate of companies going into administration as more marginal investments begin to buckle. We should not be misled by the current figures, as at Deloitte, we are seeing more work dealing with troubled companies, which were acquired from earlier failed enterprises and which are now beginning to fail again with increasing momentum.”
“Also, the banks are getting more cautious about lending money with interest rate rises beginning to bite, we have seen a marked increase in the rate of business reviews we are being asked to undertake.”
Dominic Wong, manufacturing reorganisation services partner added: “UK manufacturing continues to perform strongly this year but there are a number of indicators that more difficult times may lie ahead. The cost of raw materials remains an issue for manufacturers and combined with the rising interest rates and continuing high energy costs, we have an environment which is likely to result in an increase in instances of financial distress going forward.”
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Notes to editor
About the research
The data is compiled from administrations and receiverships in 2005 and 2006, which are legally obliged to be advertised in the London Gazette. This data treat the failure of a group of companies as a single administration. Companies in administration or receivership typically continue to operate but are overseen by a legally appointed insolvency practitioner who endeavours to sell the business as a going concern. Trading in administration can sometimes last for several months but normally takes only a few weeks before a buyer is found or a business is closed down. The administration process has become a much more common phenomenon since the introduction of the Enterprise Act 2002, which encourages business rescue, thus increasing the prospect of an improved return to creditors, preventing operational closures and minimising staff redundancies. While administrations and receiverships are similar in nature, they differ from a liquidation which is essentially the process of winding up a company which is no longer commercially viable.
About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities. Neither DTT nor any of its member firms has any liability for each other’s omissions. Services are provided by member firms or their subsidiaries and not by DTT. Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority. The information contained in this press release is correct at the time of going to press.
