The rate of businesses going into administration has slowed to levels not seen since before the economic downturn, with the retail sector showing the “most pronounced drop”.
Deloitte, which conducted the research, said the figures show that “quarter on quarter administrations are falling to a pre-credit crunch low”, and that the retail sector showed the biggest fall in business failures.
In the year to the end of September, retail administrations halved year-on-year, with 121 retailers collapsing. This represents a 13% decline compared with the previous quarter.
Deloitte reorganisation services partner Lee Manning said: “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 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.
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.”
2 Readers' comments