Published on 9 - May - 2011
Q1 retail administrations see two-year highDeloitte has reported the highest number of retail administrations in two years, with a 21% increase from Q4 2010 to Q1 2011.
According to the business advisory firm, the number of retail companies entering into administration in the first quarter of this year increased by 30% to 60, compared with the 46 in the same period last year.
Deloitte reorganisation services partner Lee Manning said: "It comes as no surprise that the retail sector has been worst affected. The sector is heavily reliant on buoyant consumer spending and the increase in VAT and the Government's austerity measures are undoubtedly hitting the sector hard. In particular, smaller retailers are likely to be feeling the pinch more so than ever, as they often have little grounds to negotiate flexible credit terms with suppliers and may find it difficult to raise funding."
Statistics from the Insolvency Service showed a jump of 55% in retail administrations from 80 in the last quarter of 2010 to 124 in the first quarter of 2011.
These figures include wholesale trade and vehicle repair, and also showed an increase in the number of company voluntary agreements, up 30% from 23 in Q4 2010 to 30 in Q1 2011.
KPMG restructuring partner Brian Green commented: "[These] figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end... On a positive note, an increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, representing the bottom of the market and signalling the upturn is on its way."
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