| Manufacturing and retail administrations down |
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| Thursday, 15 May 2008 | |
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The manufacturing and retail sectors have seen a significant drop in the number of administrations.
Lee Manning, reorganisation services partner at business advisory firm Deloitte, said it was surprising to see a 43 per cent fall in the number of retail businesses that went into administration this year, compared with the year before, given the current economic climate. The manufacturing sector saw nearly a 40 per cent drop in administrations from the previous year. "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 added. Shifts in economic cycle He explained that the data demonstrated that it takes some time for shifts in the economic cycle to impact profits, administrations, unemployment levels. "It also suggests that the downturn may be felt for some time to come. It is unlikely that these relatively positive administration levels will continue throughout this year,” he said. While the overall retail figures are down, Manning pointed out that April saw a rise in household related retailers (selling furniture, carpets and electrical goods) going into administration. He warned that discretionary expenditure, including improving the house is one of the first items to be struck off the shopping list when when consumers start to feel the pinch. "The rise in administrations in the construction industry is another indicator that both consumers and developers are preparing for a harsher financial climate,” Manning added. Devalued pound The drop in manufacturing administrations this year suggests the sector may be in reasonable health compared with other industries. While the devalued pound may not be having the gold-rush effect some had predicted, the UK manufacturing industry may be buoyed by its evolution from an expensive mass-producer to a world-leading developer of innovative products. There have been recent reports, however, of a slow down in output in the sector, so Manning thinks that it may be that a less positive story lies ahead. "Food manufacturing and, in particular, bakeries are one group of manufacturers who have been hit hard by the rise in cost of foodstuff raw materials," he concluded. Related articles
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