Administrations dip in ‘temporary reprieve’
NEW figures from the accountancy firm KPMG show fewer North West companies are going into administration.
Its monthly survey for June has recorded a drop to 35 from an average of around 48 earlier in the year.
But the firm expects a second wave of administrations, describing the lull as a “temporary reprieve”.
Brian Green, head of KPMG Restructuring in the North West, said: “We are not convinced, however, that this indicates an upturn in sentiment; more a temporary reprieve in advance of a second wave of insolvencies.
“From the business perspective, HM Revenue & Custom’s decision to allow struggling companies to delay payments on PAYE and VAT has bought them time by freeing up working capital. From the lenders’ perspective, the recent emphasis has been on debt for equity swaps but they are preparing for a significant uptick in insolvencies towards the end of the year.”
Nationally the total number of insolvencies is 1,571, well below the 5,000 KPMG predicted for 2009. But the firm said it stood by the figure and expects a wave of insolvencies later in the year.
Mr Green said he expected to see further fall-out in the automotive sector, particularly in the supplier base, and in commercial property.
* Meanwhile, a dealmaker at the helm of new turnaround fund NorthEdge Capital argues that many company failures in the first quarter could have been avoided.
Andy Ball, a former director at Lloyds TSB Development Capital, believes that many firms could have survived if they had been at the receiving end of “timely, straightforward action” such as credit restructuring.
He said: “Businesses borrow to grow, so well managed debt isn’t something to fear, it’s very much an enabler.
“Recessions skew fundamentals such as cash flow, margins and turnover and the whole basis on which a company’s debt is built can be undermined quickly. There’s a relatively short window to fix that, after which it can be terminal. A high percentage of the company failures we’ve seen were avoidable.”
NorthEdge Capital launched a corporate recovery fund last month to back companies with a £10m turnover. It has £10m committed for deals in the short term, and will look to raise up to £200m in the next 12 to 18 months.
