Midlands businesses are still hurting from the recession, with insolvencies continuing to rise in the region.
The latest analysis by PricewaterhouseCoopers found the downturn is continuing, with 614 West Midlands insolvencies in the first three months of 2009, compared with 542 in the previous quarter.
PwC research shows UK insolvencies continue to rise.
Nationally, about 5,500 companies became insolvent in the first three months of 2009 – a 14 per cent increase on the previous quarter and a huge 57 per cent increase on the same quarter of 2008.
Rob Hunt, a partner in the business recovery services practice at PwC in the Midlands, said: “Midlands businesses are still suffering from the effects of the global recession as more of them enter into insolvency with no apparent signs of a slowdown in the near future.
“Where rescue capital is a scarce commodity, it is obvious that the sooner problems are recognised, a solution is more achievable – and that solution doesn’t have to be insolvency. There are, for example, cash management and other techniques which can make the difference between survival and failure.”
The worst affected sectors across the UK continue to be construction (829 companies), manufacturing (734), retail (705), hospitality and leisure (312) and real estate (235) – insolvencies in all of which are at a five-year high.
Matthew Hammond, a business recovery partner at PwC, added: “The Midlands property sector is being particularly badly hit at the moment and the next few months could be critical. The more property companies that fail, due to a lack of finance, the more are likely to come up for sale, which could have a negative effect on prices. Of course, cash buyers will always chase bargains, especially where it is believed that sellers are desperate, but those holding property assets need to consider carefully whether now is the right time to sell or hold on for enhanced value over time.”
Despite a slightly higher rise in the rate of insolvencies than the national average, during the first quarter of 2009 compared with the first quarter of 2008, the West Midlands reported a lower increase than some other regions including London, the South East, East and Yorkshire.
Mr Hunt concluded: “Insolvency numbers are only part of the picture. There are many creative restructurings under way in the region, which are attempting to salvage viable businesses and in a significant number of cases, they are succeeding. Those businesses most likely to survive the recession will draw in advisers early, be prepared to plan for different scenarios and be obsessive in their cash-flow management.”