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News Release from: Begbies Traynor
Edited by the Manufacturingtalk Editorial
Team on 27 February 2003
Smaller manufacturers are feeling the
pinch
Smaller specialist firms are being squeezed by the continuing fall in manufacturing output, particulalrly in automotive, says the UK's leading independent insolvency practitioner.
Smaller specialist firms are being squeezed by the continuing fall in manufacturing output, says Bebgies Traynor, the UK's leading independent insolvency practitioner Particularly badly affected will be the smaller suppliers to motor manufacturers and the construction fabrication sector
This article was originally published on Manufacturingtalk on 6 Jan 2004 at 8.00am (UK)
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Bebgies Traynor estimates that one in 10 smaller manufacturing firms may be trading insolvently and this picture will get worse over the next six months unless there is a rapid recovery in output volumes.
Last week's CBI manufacturing figures showed a further decline in manufacturing output.
Falling production levels have already had a marked effect on smaller manufacturers, with the DTI reporting 646 cases of insolvencies among manufacturers in the third quarter of 2002.
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These are the latest precise DTI figures on manufacturing that are publicly available.
According to the CBI's Quarterly Industrial Trends survey released in January, the number of manufacturers operating below capacity has risen to a 20-year high after a relentless decline in orders and output.
During December and January, smaller manufacturers were particularly badly hit, with 41% stating a fall in new orders.
As output fell, 32% of SMEs in the sector had to cut jobs over the last four months.
Manufacturing currently accounts for approximately 20% of the national economy and employs around 4 million people.
A further 2.4 million jobs in the service sector depend upon manufacturing according to the CBI.
It is estimated that around 150,000 manufacturing jobs were lost last year alone.
Nick Hood, Senior London Partner of Begbies Traynor, said: "Tomorrow's manufacturing statistics will be a closely-watched set of numbers.
Our grapevine is telling us that suppliers to sectors such as motor manufacturing and construction will be among the worst affected.
We are dealing with a worrying number of companies who see no future in manufacturing in the UK.
Typically, it's firms with under 30 employees who are going to suffer because they've already been paring their fixed costs to the bone and there's precious little fat left to trim.
When the new national insurance rates come in April, we expect that this will lead eventually to another surge in business casualties." Begbies Traynor offers smaller manufacturers some advice - * Act now to improve debtor collection.
Don't let your customers stretch your overdraft to the point where you can't pay your bills.
If you have persistent late payers, use debt collection agencies to help recover long outstanding debts.
* Turn assets which aren't strictly required into cash where possible.
It's better not to let depreciating plant and machinery stand idle when it could be working harder as cash.
* Continue to try to reduce your fixed cost base.
Be ruthless on any unnecessary expenditure.
* Make it easy for customers to do business with you by improving your marketing and your customer service.
Even in these tough times, good service will win you more business and at better margins.
* If the business is in serious trouble, don't put off seeking specialist help while a rescue is still feasible.
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