Distressed manufacturers

Posted on 11 Aug 2010 by The Manufacturer

Insolvencies among manufacturers could soon start rising again.

Despite the numbers of insolvencies falling by a fifth in 2009, UK manufacturers are not out of the woods yet, according to business advisors at Baker Tilly.

“Total insolvencies in manufacturing continue to fall steadily, an 11% reduction in Q2 2010 from Q1, despite a backdrop of mixed messages of performance in the sector. We could see this trend easily reverse in months ahead” says Mark Ranson, partner at Baker Tilly Restructuring and Recovery LLP.

“The Purchasing Managers Index for July dropped slowly to 57.3 after signs of recovery in the first quarter of 2010. Export orders also fell from 51.8 to 50.8 in the same period.”

Low growth in Europe- the UK’s largest export partner- a strengthening pound and the cost of raw materials remaining fairly static have been blamed for slow growth prospects in the medium term.

“The UK currently has over 1,200 companies in a distressed position. Looking ahead, we feel that the Engineering Employers Federation’s predictions of 3.8% growth in the manufacturing sector later this year are optimistic. The VAT rise in January 2011 will likely hinder strident recovery. It seems more likely gradual growth will be sustained.” says Ranson.