Business administration numbers down on Q1 2008, but up on 2007

The business advisory firm, Deloitte, has announced its analysis of last quarter's business administration figures - which are down slightly on the Q1 2008, but still up overall compared to the same time last year.

Key administration statistics:

• The first half of 2008 saw a 16% increase in administrations compared with the same period in 2007; administrations fell by 18% in Q2 08 compared to Q1 08;
• Property, construction, electrical, installation and plumbing saw administrations increase by 54% compared to the same period in 2007;
• Printing and publishing administrations were up by 54% compared to 2007;
• Film & photographics, media & IT administrations were up 40% compared to 2007.

Lee Manning, reorganisation services partner at Deloitte said:

“The first quarter of the year certainly bore the brunt of the deteriorating economic environment: while administration figures fell 18% in the second quarter, the 2008 figures are still up 16% compared with the same period in 2007. Unsurprisingly, property and construction have seen the most significant increase in administrations; with the value of land stock declining, house prices and mortgage approvals falling, administrations have risen by over 50% compared to last summer. Rising fuel prices would appear to be just one of the problems facing the transport sector with administrations up by 30% since the first quarter of this year. Furthermore, we are seeing small, independent IT businesses taking a hit, with administration figures up by 40%. Whilst overall administrations are down this quarter, the outlook is still far from rosy. We expect the figures are set to worsen before they improve.”

Proposals put forward by the European High Yield Association for reform of the insolvency regime has ignited political debate. Neville Kahn, reorganisation services partner at Deloitte, said:

“The vast majority of administrations concern small companies because larger companies tend to restructure out of court in a distressed situation. However, with the worsening economic environment, there will be increased pressure from creditors for larger companies to enter into formal proceedings, such as administration. As a practitioner, my view is that improvements could be made to the insolvency legislation to create a more stable platform for working out larger administrations. The current administration process works wells for small businesses but this is not the case for larger companies where financing has become ever more complex.”

Commenting on the regional breakdown, Manning said:

“The impact of the harsher financial climate is being felt throughout the country, particularly in the North East, which has seen a staggering 466% increase in the number of administrations, compared to the same period last year. The South has not escaped unharmed. Administrations in the South West rose a significant 73% compared to last year. The credit crunch is permeating all areas and industries, we can only hope that Q1 saw the worst of it but it is more likely that more pain is to come.”