Fewer Firms Going BustFewer firms going bust
Bucking the national trend big-time, the number of firms going bust in Cambridge has fallen back to the same level as a year ago, when we were still in the halcyon days.
The city, which saw 11 insolvencies, compared with 12 a year ago, is also outperforming the rest of the region, which registered a 30% increase in corporate failures.
“In our first report on these statistics six months ago we described Cambridge as a beacon of prosperity,” says Chris McKay, an associate of insolvency specialists, McTear Williams & Wood in Cambridge. “It appears that the beacon is still burning bright.”
The firm’s business index, which monitors company insolvencies across the region, has risen from 100 in the third quarter of 2007 – the baseline for the index – to 163 in the firm quarter of this year, while the Cambridge index has fallen to 92. Analysing why Cambridge appears to be getting off so lightly, Chris says the preponderance of small companies in and around the city could be one explanation: “There are a lot of firms with two to five employees and their overheads can be reduced quite easily, while bigger companies have a lot of fixed overheads. “And a number of businesses in Cambridge are pre-revenue and survive from one funding round to the next, but they may find the money begins to drop off over the next six months as they come up to the next funding round.”
But right now it is very much a beacon situation, as Chris says the rest of East Anglia appears to be suffering more than the country as a whole.
“Many of the businesses we see experienced disastrous levels of sales at the turn of last year but have seen stronger sales in March and April this year, still slightly below breakeven but the damage already inflicted means they are effectively holed below the waterline, and were it not for flexibility over payments to the taxman and trade creditors, would have already failed,” Chris says, looking at the wider region.
“Other businesses have been living off strong order books from early autumn 2008 and now face an uncertain future.”
“Out view is that many businesses are reaching a tipping point where, unless there is a sustained economic recovery their options will narrow rapidly as the availability of further credit slows to a trickle and mounting trade losses cause cash to run out.”
Cambridge News
12 May 2009