Administrations (bankruptcies) in the UK manufacturing sector have increased by 33% in the first nine months of 2009 compared with the same period last year, according to analysis by Deloitte.
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The manufacturing sector saw the largest increase in administrations (35%) in Q3 2009 compared with the same quarter last year, followed by the wholesale and distribution and financial services sectors which increased by 34% and 17% respectively.
Ross James, manufacturing partner at Deloitte, commented: “The fact that there has been an increase in manufacturing administrations year-on-year is not surprising given the economic climate, however, the rate at which they have increased illustrates the fact that the sector is really suffering at the moment. Particularly badly affected sectors include metals and plastics manufacturers, tooling businesses and automotive parts suppliers. These industries have been under pressure for years, but the recession and the resulting drop in demand and output has escalated the situation.
“The key issue is that demand is not yet returning. 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.”
Lee Manning, reorganisation services partner at Deloitte, commented: “The manufacturing sector is now seeing the ripple effects and repercussions of what has happened in other sectors. The combined effect of less demand for goods – compounded by consumers reining in spending, businesses cutting back on orders as a result, the weak pound, and an increasingly competitive global market means that whilst there may be elements of reprieve across some sectors, this isn’t yet the case for the economy as a whole.”
Ross James added: “Whilst there are some positive signs elsewhere in the economy, the timing around a manufacturing recovery remains very uncertain. Industry needs confidence to return, and businesses to start investing again, so that a recovery in demand feeds into new orders and enables manufacturers to kick-start production.”
