Number of corporate administrations rise by 5.1% over past year

“Although today's figures don't appear as high as some were anticipating, they continue the trend of slight increases in corporate administrations we have seen over the past year, leading many to question whether a 'hang on and hope' mentality is present within some of the areas of the market.
 
“In the retail sector for example, with strong sales figures over Christmas escaping many businesses in the high street, the next few weeks and months will prove vital for their survival, as stakeholders who may have offered their support over the festive season decide whether companies have a positive outlook or not. In this sector we expect the rise in insolvencies to continue into Q1 2012 as a lag response to defaults on December quarter rent payments and pressure from VAT bills and suppliers.
 
"The downward pressure on many peoples’ net disposable income, which is still affecting many consumers, has especially impacted the hospitality and leisure sector, with hotels, bars and restaurants suffering the most with a 19% increase in administrations. At Baker Tilly, we have noticed that London and the South East in particular has been hit by a surge in such activity.
 
"Although the current low interest rate environment, coupled with supportive stakeholder attitudes, may be allowing some weaker companies to continue to operate, it's important to remember that such companies will probably have very low cash reserves will struggle to raise further debt. The future for these so-called 'zombie' companies remains particularly uncertain and we are already seeing an increase in stakeholders seeking advice from us in how to handle such companies in the current quarter.”