Deloitte

SOUTH WEST INSOLVENCIES FALL 22 PER CENT IN 2007

But Deloitte Warns That Several Sectors Will Be Hit By The Credit Crunch in 2008

Latest analysis of administration and receivership figures by Deloitte, the leading business advisory firm, shows that insolvencies in the South West are down by 22 per cent for the 12 months to December 2007.

There were 110 insolvency appointments in the region last year, down from 141 in 2006. The fall is the second highest of any UK region after East Anglia, which saw a drop of 32 per cent.

Nationally, there were 2,523 appointments, down from 2,737 – an 8 per cent fall. Meanwhile just two regions – the North East and North West - saw an increase in insolvencies last year.

Richard Hawes, reorganisation services partner at Deloitte in Bristol, said the figures showed that for most of last year, the UK economy remained relatively healthy, with record levels of corporate finance deals completed and an abundant availability of cheap credit.

But he added: “The effects of the summer‘s ‘credit crunch‘ are beginning to be felt by consumers as we are now seeing downward pressure on housing prices and tighter credit terms, leading to a reduction in discretionary spend.

“Until recently there was a relatively positive environment with insolvency appointments in decline and businesses worked together with lenders to restructure and refinance, without an insolvency event occurring.

“However, we are entering a more demanding credit phase where the prospects of solvent rescue will be reduced.”

In terms of sectors, healthcare and social services (18 per cent) and hospitality and leisure (15 per cent) saw the largest increase in insolvency appointments, with the biggest falls recorded in the film, photographic, media and IT sector (37 per cent) and manufacturing (18 per cent).

Richard Hawes commented: “There have been a number of factors hampering the hospitality and leisure sector, including increasing price competition from supermarkets, growing trends of drinking and entertaining at home, and more recently the smoking ban.

“In addition, non-qualification of any of the Home Nations for Euro 2008 will affect those establishments whose forecasts had already built-in significant sport fixture-related income. We anticipate that the downturn will dent discretionary spend, and that the industry will be hit further.”

On retail, Mr Hawes said: “The retail sector has so far held up well, after several years of bumper profits and good trading conditions. However the position of the weaker performers will start to deteriorate as drops in discretionary spend coupled with fierce price competition materialise.”

Meanwhile the transport and communications sector is set for an upturn in insolvency. Richard Hawes said: “This sector is being squeezed by increasing fuel prices, and may see pressure on volumes and margins in line with any reduction in economic activity.”

Looking at the coming year, Deloitte forecasts that we can expect to see the effects of the economic downturn materialising in a number of sectors, such as property, where appointments remained steady in 2007.

However, tighter credit conditions and falling house prices in both the residential and commercial sectors will have an impact on property developers (particularly in buy-to-let), the construction trade and related financial service providers, specifically mortgage brokers and estate agents.

ENDS 18th February 2008

For further information please contact Neil Fraser, Sturgess Van Damme, on 01275 349011 or email neil@sturgessvandamme.co.uk