Insolvencies reveal bleak outlook

A grim picture of the state of UK business has been painted by the Department of Trade and Industry (DTI), the Confederation of British Industry (CBI) and Pannell Kerr Forster, revealing a rocketing number of insolvencies.

A DTI report revealed that insolvencies for the first quarter of 1999 rose by 16.6 per cent compared with the same quarter last year, representing a 9.8 per cent climb on the final quarter of 1998. The statistics support the difficult trading environment that has led to a spate of insolvencies in the channel, including Roldec, Pino and Memsolve. The figures represented an average of 1,243 companies collapsing per month since the beginning of the year.

Small manufacturers were highlighted as particularly suffering from the downturn. A survey by the CBI and Pannell Kerr Forster revealed that over the past four months, there was a drop in business confidence within the sector.

The strong pound was highlighted as a key problem as the total number of orders fell. Output, employment and investment also fell and 68 per cent of companies were not operating at full capacity.

Prices also went into a tailspin with the UK's prices falling at their fastest rate on record. The outlook was also gloomy with manufacturers seeing no end to the trend.

John Alexander, partner at Pannell Kerr Forster, said: 'Time and again, respondents have believed that things would get better only to be knocked back by reality. It seems the optimism of SME manufacturers has got the better of them and if their business plans are equally optimistic, they urgently need to put together realistic ones to accommodate uncertainties.'

Colin Perry, chairman of the CBI's SME council, said: 'SME manufacturers ... are in recession and a glance across the sector suggests that the smaller you are, the harder you're hit.'