Deloitte: Propcos ‘continue to walk tightrope’

The property and construction sector accounted for one in five company administrations across the UK economy in 2010, according to figures released by Deloitte.

The total number of companies falling into administration in 2010 declined 35% from 3,188 in 2009 to 2,086, Deloitte said.

The last quarter of 2010 saw a decline of 6% on the previous quarter, with a total of 438 companies falling into administration compared with 467 in Q310.

The property and construction sector bore the brunt of the economic downturn in 2010, with 453 companies going insolvent. However, this is a significant decline of 34% from 2009 when 683 companies in this sector went into administration.

Lee Manning, reorganisation services partner at Deloitte, said: "Whilst 2010 administration statistics may have improved, the reality is that many companies are still walking a tightrope. A large number of struggling companies were able to stay afloat because of low interest rates, a lenient approach by lenders and HMRC's favourable Time to Pay scheme. However, the rapidly changing economic environment will no longer make this sustainable."

Manning added: "Risk of insolvency plays a big part in the property and construction industry because of its heavy reliance on supply chain relationships. Whilst many of the smaller property and construction firms would have been affected in 2008 during the early stages of the downturn, the sector still remains the largest to be hit by the market slowdown, accounting for one in five administrations in 2010."

The retail industry showed healthy signs of resurgence in 2010 with a 43% decline in administrations from 165 compared to 290 in 2009.

Manning said: "Whilst these figures will no doubt bring a glimmer of hope to the retail sector, we will undoubtedly see a growing number of retailers struggle to cope in the first few months of 2011 as they buckle under the pressure of Government spending cuts and the increase in VAT which will see consumers cut back on spending in an attempt to make ends meet."

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