Businesses in the retail, construction and real estate sectors
are up to three times more likely to go insolvent compared to other
sectors such as professional services, according to our Insolvency
Predictor. Why is it that some sectors are suffering more
than others in this continued period of economic uncertainty?
Retailers are struggling as consumers are paying down debts
rather than spending (apart from around celebrations like the
Queen's Jubilee) meaning spending on the high street is down.
And they are getting further squeezed owing to high rents being
charged with landlords showing no sympathy to their plight.
As usual London bucks this trend and we have seen record rents
being paid for prime spots on Oxford Street, but across the country
the High Street continues to be a tough place to do business.
Headlines today reported that almost three quarters of high street
retailers have Sale or advertising promotions in their shop
windows, up from 40% three years ago. Retailers seem to be doing
everything they can to increase consumer demand, without much
The BBC today reported that ministers are leading a Make it in
Great Britain campaign to promote a manufacturing-led recovery to
highlight the sector's £137b annual contribution to the economy.
However, not all sectors are performing as well. The construction
industry in particular is struggling. During the time of
recession capital expenditure is always reassessed and any plans
which can be delayed or cancelled are. With many long-term projects
now coming to an end and a decreasing number of new projects in the
pipeline due to the pressures of the recession, those who remain in
the industry are under price pressure to continue to drive down the
margins on the remaining work they have. This is forcing the
construction industry to scale back their operations and ultimately
stopping them from growing.
Companies need to remember that insolvencies do not happen
overnight. They are prompted by a long period of poor performance
and a failure to implement well thought out control mechanisms.
Woolworth's overnight collapse was in reality a result of over 5
years of poor performance. Many sinking companies make the mistake
of relying on growth projections to continue their operations.
However, it is easy for costs to spiral and proper planning is
essential if you want to remain in the marketplace. Small changes
such as better payment practices will also ensure easier access to
finance and ultimately allow for better cashflow, allowing
companies to grow and contribute to the recovery of the UK