Administration still looming over manufacturers

Posted on 20 Oct 2009 by The Manufacturer

Administrations in the manufacturing sector have increased by 33 per cent in the first nine months of 2009 compared with the same period last year, according to accountancy firm Deloitte.

What’s more, the manufacturing sector saw the largest increase in administrations (35 per cent) in Q3 2009 compared with the same quarter last year. It was followed by the wholesale and distribution and financial services sectors (34 per cent and 17 per cent respectively).

The organisation said metals and plastics manufacturers, tooling businesses and automotive parts suppliers are among the worst affected.

Though “not surprising,” Ross James, manufacturing partner at Deloitte, says the increased figures are indicative of the struggle manufacturers are still facing.

“The key issue is that demand is not yet returning,” says James. “Currently we are in a position where customers seem to be playing it safe and not placing big orders. Whilst destocking has taken place across the board there has not yet been the surge in restocking orders which industry needs to regain momentum. Further, at a time when the weak pound is benefiting some exporters, manufacturers who are reliant on imports are struggling as the cost of their raw materials increases.”

He added that while other industries are now beginning to experience an upturn manufacturing’s recovery hinges on an increase in business investment to fuel demand. “the timing around a manufacturing recovery remains very uncertain,” he said.