The Midlands saw a rapid fall in administrations last year according to new research – but experts warn that companies are still walking a tight rope to survive.
The total number of Midland companies falling into administration in 2010 decreased by 45 per cent from 577 in 2009 to 316, according to research by Deloitte.
During the last quarter of 2010, 71 administrations were recorded in the region, compared to 68 during the previous quarter. This figure compares favourably to the 109 administrations in Q4 2009. Nationally, the number of administrations was also down year on year, from 3,188 in 2009 to 2,086 in 2010 – a fall of 35 per cent.
But while administration statistics may have improved, according to Dom Wong, reorganisation services partner at Deloitte in Birmingham, the reality is that many companies are still on the edge.
"A large number of struggling companies were able to stay afloat because of low interest rates, a lenient approach by lenders and HMRC’s favourable Time to Pay scheme.
"However, the rapidly changing economic environment will no longer make this sustainable."
According to Deloitte’s research, the property and construction sector bore the brunt of the economic downturn in 2010, with 453 companies becoming insolvent.
However, this is a significant decline of 34 per cent from 2009 when 683 companies in this sector went into administration.
The retail industry showed healthy signs of resurgence in 2010 with a 43 per cent decline in administrations from 165 compared to 290 in 2009.
Mr Wong said: "Risk of insolvency plays a big part in the property and construction industry because of its heavy reliance on supply chain relationships.
"Whilst many of the smaller property and construction firms would have been affected in 2008 during the early stages of the downturn, the sector still remains the largest to be hit by the market slow down, accounting for one in five administrations in 2010.
"For the retail sector, whilst these figures will no doubt bring a glimmer of hope, we will undoubtedly see a growing number of retailers struggle to cope in the first few months of 2011 as they buckle under the pressure of Government spending cuts and the increase in VAT, which will see consumers cut back on spending in an attempt to make ends meet."
