Pressures ease for industry

Posted on 1 Nov 2010 by The Manufacturer

Almost 50 per cent less manufacturing companies fell into administration in the first nine months of 2010 compared with the same period last year, according to business advisers Deloitte.

There has been 252 manufacturing administrations so far this year compared with 439 at the same conjecture last year and this 42.6 per cent decline has been topped only by the retail sector (50.2%) and financial services (47.1%). This compares with a 36% drop when taking all companies across all sectors into account.

Administrations have been falling steadily, quarter by quarter too, and in Q3 2010, there were only 66 manufacturing administrations compared with 128 in 2009.

Ross James, manufacturing partner at Deloitte, said that although businesses should remain cautious, the rates of failure are “a positive sign”.

“The decline in administrations highlights the success of the proactive approach adopted by many manufacturing businesses to manage both their cash flows and stock levels,” he said. “In addition there is now some more, albeit fragile, confidence in the corporate sector to invest, which is translating into orders for capital goods manufacturers.

He also pointed to a positive outlook for mergers and acquisitions as another sign of recovery. A recent survey by Deloitte among CFOs found that over 80% expect M&A activity to increase over the next 12 months, with 18% identifying expansion through acquisition as a priority for the coming year. “This is positive news for business more generally and demonstrates that companies now have the confidence to look for growth opportunities,” said James.