Total administrations for the first nine months of the year are down 36% compared with the same period in 2009, according to analysis by Deloitte, the business advisory firm. Thus far 2010 has seen a total of 1,648 administrations, compared with 2,589 in the same period in 2009. Furthermore, administrations are down 20% from 2,061 administrations in the same nine month period in 2006 – the last full year before the financial downturn began.
The research shows that quarter on quarter administrations are falling to a pre-credit crunch low. Q3 of this year saw 476 administrations, down 36% from 733 in the same period in 2009, and down 8% on Q2 2010 (558).
Lee Manning, reorganisation services partner at Deloitte, comments: “Whilst the economy holds its breath for the outcome of the Comprehensive Spending Review, these figures offer a glimmer of hope. For the first time since the financial crisis began, we’re beginning to see a consistent drop in the numbers of companies hitting the wall. This can only be a good thing.”
The decline in administration figures is being seen across the industry sectors. The most pronounced drop was seen in the retail sector, with administrations down 50% on the same nine month period in 2009, and down 13% on the previous quarter.
Manning adds: “The decline in retail administrations highlights just how effective the proactive approach adopted by businesses to manage both their cash flows and stock levels appropriately has been. Certainly the raft of retail administrations we saw at the end of 2008 and beginning of 2009 sorted the weaker businesses from their more viable competitors.
“How this develops in the coming months will be a different story, however. UK consumers are already the most indebted in the world. With the impending government spending cuts, the forthcoming rise in VAT and the impact of higher income taxes and National Insurance, there is no question that consumers will have less disposable income. They will have to economise and where they choose to make their cutbacks will clearly impact the industry. Whilst we are unlikely to return to 2008 / 2009 retail administration levels, there are tougher times ahead. It would not be surprising to see more retail casualties.”