Insolvency affects fewer food firms

By Graham Holter and Mike Stones

- Last updated on GMT

Related tags: Drink manufacturing sector, Industry

Fewer food firms became insolvent in October compared with the same month last year
Fewer food firms became insolvent in October compared with the same month last year
The food manufacturing sector has seen a fall in the number of companies becoming insolvent, according to a new study.

But the industry remains in a weaker position than most other sectors, Experian’s latest Insolvency Index reveals.

In October there were 14 insolvencies among food manufacturers. This represents 0.16% of the companies in the sector as a whole, compared with 0.21% in October last year.

Terry Jones, director of communications at the Food and Drink Federation, said: “The food and drink manufacturing sector has shown real resilience over the past year, with our industry weathering the storm and in most cases deliver growth.

Price volatility

“Over the past year, challenges such as commodity price volatility have dented the business confidence of manufacturers and our members tell us that access to finance, in particular bank financing, is a key concern.”

But, due to the nature of food and drink manufacturing and its ability to innovate, add value and respond to consumer tastes, the sector has been able to face these challenges and deliver growth, said Jones.

“It is encouraging to see that the financial health score for the sector has risen and FDF continues to work to create the right environment for businesses to thrive,” ​he added.

Experian calculates that the financial strength of the food manufacturing industry has grown year-on-year.

Its financial strength score predicts the likelihood of a business failing in the next 12 months, with 100 being the least likely to default and one being the most likely.

The food industry’s score went from 76.6 in October 2010 to 77.98 this year. But despite the improvement, the figure lags behind the industry average of 85.81.

Breweries score 79.49, spirits, wine and tobacco firms 82.68, and food retailing 75.49.

Across all sectors, 0.1% of businesses became insolvent in October.

Business population

Max Firth, head of business information services at Experian, said: “While 0.1% represents a very small percentage of the UK’s business population failing in October, we are seeing an increase in insolvencies across most sizes of business.

“As a result of this, more and more businesses are now acutely aware of the importance of having a good understanding about the companies they deal with.”

Meanwhile, last month Experian warned that failing to understand credit awareness is costing UK small to medium-sized food and beverage manufacturing businesses thousands of pounds.

Its survey of 49 small and medium-sized enterprises (SMEs) operating in the manufacturing sector revealed that 65% did not check their customers’ credit status, 40% did not know what a credit score was, while nearly 70% never checked their own score.

Simon Streat, md of Experian’s UK SME business, said: “Manufacturing is one of the industries in the UK that suffers most from cash flow issues… It relies heavily on trade credit and a reliable supply chain.

“Despite these factors, there are so few small and medium sized manufacturing firms that check their own score and even fewer checking their customers and suppliers.”

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