City in economic micro climate ‘all of its own’

The number of companies going bust in Cambridge has halved over the past three months, compared with the same time a year ago. In another indicator of how the city continues to enjoy its own economic climate, just eight firms in the Cambridge postcode area went down. This compared with 16 during the second quarter in 2009, and 10 during the first quarter of this year.

But the news is not all good, and Chris McKay of insolvency specialists McTear Williams & Wood (MWW) in Cambridge is cautious, warning: “Cambridge continues to have fewer corporate insolvencies than the rest of the region, but I believe it is vulnerable to public sector cutbacks, and the next six to 12 months could show a different picture.”

Across the region, business failures have fallen for the fifth successive quarter, stabilising close to pre-credit crunch levels. The number of failures in East Anglia was down 16% on the first quarter, compared with an increase of 3% nationally. Comparing the second quarter this year with last year, insolvencies fell 41% in East Anglia, 18% nationally.

MWW’s business index for the region now stands at just 114, only 14 from the baseline established in 2007. The national comparative is 152. But, looked at more closely, the current picture for Cambridgeshire is even more rosy, compared with the rest of the country and the rest of the region.

MWW say: “Cambridgeshire, with an index of 53 continues to outperform the national and county indexes by a large margin, apparently in an economic micro climate of its own.

“Suffolk and north Essex have bucked the trend, seeing increases in corporate insolvencies both quarterly and annually, and with their index now standing at 231.”

Chris added: “The region’s figures are flattered by Cambridgeshire with its concentration of high tech businesses more reliant on the availability of venture capital than sales/GDP growth.

“If Cambridgeshire is taken out of the index it would stand at 162, which is pretty much in line with the national index.

“Most insolvency practitioners expect the number of corporate insolvencies to rise as the early stages of a recovery are normally the most challenging for businesses, but so far this recession has differed from others, with creditors being unusually lenient, and it is not clear what might change this anytime soon.

“The key will continue to be the attitude of HM Revenue & Customs to ‘time to pay’ arrangements and the support provided by banks.

“However, if the recovery were to falter, creditors’ attitude towards risk could turn on a six pence, lending standards would tighten and businesses could fail in large numbers.”

Chris’ advice is to maintain a cash cushion and to have a plan B.

Cambridge News
17 August 2010

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