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Monday, 1 October 2012

Retail administrations fall by 15% Year on Year

In the continuing flat economy the actual number of retailers that went into administration fell by 15% in the last quarter.  This is despite the failure of a number of large chains such as JJB Sports, Clinton Cards and Aquascutum.  This is according to research undertaken by Deloitte.

The third quarter of 2012 saw a total of 395 companies across all sectors falling into administration compared with 524 a year before.  However, a company going into administration can be an expensive process and is really only suitable for larger businesses so it is not the whole picture.   That said there is still a downward trend on the rate of companies becoming insolvent.  The position will be clearer once the Insolvency Service's statistics come out in a few months.  

So why is the insolvency rate so low if we are in a recession?  Simply because the banks are not crystallising their balance sheets,  what is more they don't want to loan to other good businesses that would improve their balance sheet if other loans are called in. HMRC are not putting much pressure on businesses. Finally companies may be running on empty but they are not overstretching themselves and so building up cashflow pressures, even if on paper they are profitable.

With regard to retailers they are finding themselves under a great deal of pressure from business rates which has become of particular concern.  Administration is not the only option open to retailers that want to reduce liabilities and leave premises.  Please read our page on retailer rescue.

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Many thanks for your comments. If you have a private business problem and you want advice give us a call on 0800 9700 539 or email me at keiths@companyrescue.co.uk. If you are a professional advisor with a troubled client, please suggest they visit www.companyrescue.co.uk or contact me as above.

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