Caution over admin figures

Research carried out by Deloitte, the business advisory firm, has shown a 20 per cent fall in administrations in the manufacturing sector compared with the same period in 2006.



There were 297 administrations in the first half of 2007 compared to 371 during the same period in 2006.



However, Lee Manning, reorganisation services partner at Deloitte, said that the figures should be considered carefully.



‘With interest rates rising, we will see an acceleration in the rate of companies going into administration as more marginal investments begin to buckle,’ he said. ‘We should not be misled by the current figures as we are seeing more work dealing with troubled companies, which were acquired from earlier failed enterprises and which are now beginning to fail again with increasing momentum.


‘Also, banks are getting more cautious about lending money with interest rate rises beginning to bite. We have seen a marked increase in the rate of business reviews we are being asked to undertake.’


Dominic Wong, manufacturing reorganisation services partner at Deloitte, also said: ‘UK manufacturing continues to perform strongly this year but there are a number of indicators that more difficult times may lie ahead. The cost of raw materials remains an issue for manufacturers and combined with the rising interest rates and continuing high energy costs, we have an environment which is likely to result in an increase of financial distress.’