Midlands sees rise in company administrations

The number of companies in the Midlands going into administration surged by almost 40% in the first quarter of the year, reflecting the challenges faced by businesses in the region.

New figures from restructuring specialist Interpath Advisory, showing analysis of notices in The Gazette, reveals that there were 43 administrations across the Midlands in Q1 2024, up from 31 in the same period last year.

The increase in administrations in the Midlands outpaced the national trend, where there was only a slight uptick from 321 (Q1 2023) to 328 (Q1 2024), with the Midlands accounting for 13% of all administrations in Great Britain, compared to 10% the previous year.

Sectors most affected in the Midlands were industrial manufacturing (six cases), building & construction (five cases), and business services and professional services, each with four cases.

Chris Pole, managing director and head of the Midlands team at Interpath Advisory, said: “There has been a sustained upward pressure on insolvencies in the Midlands and wider UK economy in recent years as Government support has fallen away and businesses have been buffeted by inflation, poor growth, a cautious consumer, and high interest rates. 

“From what we’re seeing on the ground, cashflow pressure is ultimately proving to be the tipping point. Costs have hammered margins, but many management teams have also found it hard to find the revenues that will give them sufficient breathing room. A stubborn base rate and tight covenants with lenders combine to make the hard wall that they can then come up against. That distress can spread through supply chains and can impact larger businesses. 

“Looking ahead, we expect that the administration rate on an annual basis will continue to rise and to surpass the level we saw immediately before COVID-19 in 2020. That point of inflexion is likely to come towards the end of this year and will represent an important marker in the re-adjustment of the UK economy. Let’s not forgot that, while administrations can signal distress the outcome of these processes is equally vital and the other side of the equation. That’s why it is so essential that businesses seek support as early as possible as it can give them the best chance of a positive outcome.”