East Anglia Hit Hard by RecessionEast Anglia hard hit by recession
Number of insolvent companies
|
2008
|
Cambs
|
Norfolk
|
Suffolk
|
N. Essex
|
Total
|
|||||
|
|
|
|
|
|
|
|||||
|
Qtr 1
|
15
|
18
|
22
|
18
|
73
|
|||||
|
Qtr 4
|
29
|
28
|
21
|
21
|
99
|
|||||
|
|
|
|
|
|
|
|||||
|
2009
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|||||
|
Qtr 1
|
22
|
40
|
34
|
33
|
129
|
|||||
|
|
|
|
|
|
|
|||||
|
MW-W.com index 263
|
||||||||||
|
|
|
|
|
|
|
|||||
|
Increase on previous quarter 47%
|
||||||||||
|
|
|
|
|
|
|
|||||
|
Data: All corporate insolvencies except compulsory liquidations as advertised in Stubbs Gazette and the public notices in the principal local newspapers.
|
||||||||||
|
|
||||||||||
The McTear Williams & Wood business index, which monitors corporate insolvencies in East Anglia, shows that there has been another marked increase in company failures across the region.
The mw-w.com index has risen from 100 in quarter three 2007 – the baseline for the index - to 263 in quarter one 2009.
Put another way, the number of corporate insolvencies has risen just over two and a half times in 18 months. In quarter one 2009 the number of corporate insolvencies was up 77% on the same period a year ago.
For the first time we have expanded the index to include North Essex (this covers companies based north of a line running from Colchester to Stansted Airport) to provide a more complete picture.
All counties have shown significant increases year on year and with the exception of Cambridgeshire, there are also significant increases over the previous quarter.
The recession has hit East Anglia hard, albeit belatedly. This region saw the number of corporate failures in quarter one 2009 rise 30% over quarter four 2008; this is against a national rise of just 8%. It is likely that this reflects East Anglia’s bias towards service companies which are only now impacted by the failures in manufacturing businesses.
So far the recession has lead to a contraction in GDP of 4.1% with further quarterly falls likely. This is a much higher contraction than the UK experienced in the early 1990’s when the peak to trough figure was 2.5%. The recession in the early 1980’s saw a contraction of 6.2% and only time will tell whether the current recession will reach or exceed that level.
Many of the businesses we have seen at McTear Williams & Wood experienced disastrous levels of sales at the turn of the year but have seen stronger sales in March and April 2009; however, many are still slightly below break even point and damage already inflicted means that they are effectively holed below the waterline. Were it not for flexibility over payments to HM Revenue & Customs and trade creditors many of these businesses might have already failed. Other businesses have been living off strong order books since early autumn 2008 and now face an uncertain future. Our view is that many businesses are reaching a tipping point where, unless there is a sustained economic recovery, options will narrow rapidly as the availability of further credit slows to a trickle and mounting trading losses cause cash to run out.
If you are a business manager unable to pay pressing creditors we recommend that you take early advice. To quote from our book entitled ‘Corporate Insolvency’: “They say the spectator sees more of the game. This is true in insolvency. The warning signs are more obvious to a casual observer than they will be to you. When you are in the thick of it, punch drunk from fending off creditors and juggling your budget, what an outsider would see as a big problem may appear quite normal to you.” Our message to struggling businesses is that you do not have to face this alone. Talk to your existing advisors or visit us at mw-w.com."
There is no doubt that the mw-w.com index is still set in an upward direction and we believe that the real test will come in the autumn this year when the outlook for the economy should be clearer.
- Andrew McTear is a partner with regional business rescue and insolvency specialists McTear Williams & Wood. Tel 0800 085 5070