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Business Failures Reach New Low
Listed under: News
Published: Wednesday, May 05, 2010
The number of retail companies falling into administration has fallen significantly in the first quarter of this year, dropping from 124 enterprises in 2009, to just 44 in 2010, according to a recent report from accounting and consultancy firm, Deloitte.
The findings, which reveal that business failures were down 65% during the first four months of 2010, show that the number of retailers going into administration is now at its lowest level for four years, suggesting the effects of the economic climate could be coming to an end.
However, Lee Manning, reorganisations services partner at Deloitte, has warned retailers that the difficulties of the past few years are far from over, saying, “The first quarter of 2009 saw exceptionally high levels of retail administrations, so it is not surprising to see a drop this time round.
“But, this period can be make-or-break time for struggling retailers, and the scale of the decrease suggests that many companies have been successful in taking the measures necessary to equip their businesses for tougher trading conditions.
“Indeed, we have seen an increasing acceptance of the use of Company Voluntary Arrangement (CVA) – an insolvency procedure for financially-troubled companies – and pro-active steps to better manage cash flows. However, whilst these figures appear to suggest an improvement in fortunes for the retail industry, the outlook is far from plain sailing,” he adds.
Ian Geddes, UK head of retail at Deloitte agrees, adding, “The UK consumer faces a number of reductions in their disposable income over the next 12 to 18 months and it is hard to imagine that measures to tackle the national debt will not impact them further. Retail sales are likely to remain broadly flat this year, and probably the next, whilst costs will continue to increase. Growth will be hard to come by and further business failures seem inevitable.”
The findings, which reveal that business failures were down 65% during the first four months of 2010, show that the number of retailers going into administration is now at its lowest level for four years, suggesting the effects of the economic climate could be coming to an end.
However, Lee Manning, reorganisations services partner at Deloitte, has warned retailers that the difficulties of the past few years are far from over, saying, “The first quarter of 2009 saw exceptionally high levels of retail administrations, so it is not surprising to see a drop this time round.
“But, this period can be make-or-break time for struggling retailers, and the scale of the decrease suggests that many companies have been successful in taking the measures necessary to equip their businesses for tougher trading conditions.
“Indeed, we have seen an increasing acceptance of the use of Company Voluntary Arrangement (CVA) – an insolvency procedure for financially-troubled companies – and pro-active steps to better manage cash flows. However, whilst these figures appear to suggest an improvement in fortunes for the retail industry, the outlook is far from plain sailing,” he adds.
Ian Geddes, UK head of retail at Deloitte agrees, adding, “The UK consumer faces a number of reductions in their disposable income over the next 12 to 18 months and it is hard to imagine that measures to tackle the national debt will not impact them further. Retail sales are likely to remain broadly flat this year, and probably the next, whilst costs will continue to increase. Growth will be hard to come by and further business failures seem inevitable.”
