Manufacturing insolvencies hit five year high of 1,466
The number of manufacturing businesses entering insolvency has hit a five-year high rising 7% to 1,466 in the last year (to 30 September 2019) up from 1,373 the previous year, says chartered accountants and business advisors, Moore.
Moore says that the rise in manufacturing businesses going insolvent is being driven in part by Brexit-related uncertainty and a broader slowdown across Europe.
UK manufacturing orders fell for the sixth consecutive month in October. In June this year nearly a third of UK manufacturers said they received a lower number of orders than usual.
Moore says that the continued lack of clarity on Brexit is causing increased levels of concern about the future financial requirements that companies may require. In the manufacturing sector this has resulted in a rise in the number of UK based customers of these businesses deferring making significant purchases
There are also concerns in the sector that some European manufacturers are looking to cut UK-based manufacturers out of their supply chains in order to guard against the impact of a possible “no-deal Brexit”. A no deal Brexit would see a dramatic increase in the cost of components bought from UK manufacturers by businesses within the EU due to tariffs and shipping delays.
The fall in the value of Sterling which should have made UK exports much cheaper for foreign buyers has been largely offset by increased input costs for UK manufacturers who themselves buy in components from overseas.
Robert Branch, managing partner at Moore South West, says: “The latest figures show that the doom and gloom around the UK’s manufacturing sector continues.”
“UK manufacturers should be going through a period of heavy investment in order to close their productivity gap with competitors in places like Germany. Instead many are having to save as much cash as they can to tide them through until order books recover, as banks and other finance houses are indicating that they will be reluctant to provide additional funding to support working capital.”
Moore says that some manufacturers are choosing to liquidate their businesses now instead of continuing to operate and potentially facing compulsory insolvency. Business owners increasingly see selling assets and shutting down as a better option rather than continue to lose cash hoping for a recovery in fortunes.
Says Robert Branch: “Banks are restricting their lending to the sector. At the same time, more and more business owners are less willing to inject the extra equity into their business that is necessary to ensure their survival, for fear of not getting it back.”
“As we get towards a Brexit deal the outlook for manufacturers should become clearer.”
Moore adds that a number of its clients in the manufacturing sector had been unhappy with the advice offered by the Government on how to prepare for Brexit.
Robert Branch adds: “We continue to hear from our clients that the Government’s guidance has not been up to scratch. There is a lack of detail in the Government advice that means some businesses, particularly smaller businesses, are unable to implement contingency plans.”
The number of manufacturing businesses entering insolvency has hit a five-year high of 1,466 – up 7% in the last year alone.
