Cyrus R W Holdings, Zero One Nine Limited and URT Composites Limited left over a staggering £10 million worth of bad debt combined when they went into liquidation last quarter, standing out as the highest within the industry.
On top of this, there was also a substantial rise of 23.3% in the number of County Court Judgments (CCJs) within the sector, indicating that if companies were not falling to insolvency due to cash flow problems, they were still struggling to pay bills.
The Watchdog report tracks quarterly economic developments across Manufacturing and 10 other sectors (Banking & Financial, Farming & Agriculture, Hospitality, IT, Construction, Professional Services, Retail, Transport, Utilities and Wholesale).
Failures in the manufacturing industry were up 55.9% in the first three months of 2018. The top five failed companies in Q1 2018 all had considerably higher turnovers than the top five failed companies last quarter, going some way to explaining the large leap in suppliers’ bad debt figures.
Among the failed companies this quarter was meat supplier Russell Hume Ltd, which collapsed weeks after production was suspended due to a ‘serious failure’ to comply with food hygiene regulations, discovered during a surprise inspection by the Food Standards Agency. Russell Hume, which counted Jamie’s Italian and Wetherspoons among its customers, had a turnover of £130m, 166.6% higher than the largest company to fail in Q4 2017.
These results somewhat overshadow other more positive findings for the industry, including a 3.7% rise in sales between quarters. Employment is also on the up, with an increase of 9.1% from last quarter, as well as a more modest growth of 1.7% in the number of active companies.
Growth in new companies was also strong, with 6,278 new businesses in manufacturing in the first quarter of this year, up 27.5% when compared with the 4,923 new companies reported in the last quarter of 2017.
The research showed a mixed picture when comparing Q1 2017 and Q1 2018. Total sales figures saw an increase of 7.5% on Q1 2017, and total employment was 17.6% higher than this quarter last year. However, companies bad debt (money owed to the sector) and CCJs climbed by 24.9% and 26.5% respectively compared to a year ago.
Rachel Mainwaring, COO at Creditsafe, commented: “It is disheartening to see such concerning levels of bad debt and CCJs in the manufacturing sector, reported in today’s Creditsafe Watchdog Report. The collapse of some sizeable businesses has clearly had an impact on the industry.
“However, it isn’t a totally gloomy outlook for the sector, with notable growth in new companies both compared with this time last year and last quarter. Hopefully, as we move into Q2, the industry can continue its positive results in sales performance and move towards reversing the trend of growing bad debt and CCJs.”