First quarter administrations see dramatic fall

THE number of companies entering administration in the first quarter of 2010 fell by 46% on the previous year, new data shows.

This good news is underlined by figures showing the last six months (October to March) have seen the fewest number of administrations (1,154) of any period in the last four years. 

Bill Dawson, reorganisation services partner at Deloitte in the North West which compiled the data, said the trend suggests businesses may have turned a corner.

He said:  “The magnitude of the decline in administrations is surprising.  Traditionally, the first quarter of the year sees an increase in the number of companies falling into administration following the festive season.  However, this year we have not seen this.”

He added: “Measures put in place by businesses, along with more versatile lender groups saw companies aggressively attacking costs and improving cash management throughout last year – clearly this has borne positive results.”

The hospitality and leisure sector, which offers a good insight into discretionary spending habits, has seen the number of administrations drop by over 50% year on year.

The manufacturing sector also saw a drop of 48% in the number of administrations compared with the same period a year ago. 

However, there was a note of caution that the impact of the impending election cannot be overlooked and that while economic conditions have improved they remain fragile.

Mr Dawson added: “Inevitable public spending cuts and tax rises, as well as an increase in interest rates will put further pressure on companies. The pain may have eased, but I am not confident that it is over.

“It will be interesting to see how this plays out after the election when new legislation may come into force.  Those businesses that have already done everything they can to manage cash flow may not be able to tighten their belts any further and consumers will no doubt have to rein in discretionary spending.”