Manufacturers and retailers are struggling most in the present economic climate and will be in greatest need of support in the year ahead, the Institute for Turnaround has warned.
Andy Leeser, its chairman, said the manufacturing sector would require the most turnaround expertise. The automotive sector was a “case in point”, he said, with issues relating to Brexit, electric vehicles and environmental, social and corporate governance all putting pressure on the industry.
The institute is a membership organisation for advisers who help distressed businesses to avoid going bust. According to its latest impact report, 63 per cent of its members expect manufacturing to be the sector under most stress, with the remainder believing retail will be the worst hit. More than 17,000 retail businesses have already been identified as “distressed”, where payments increasingly are being delayed and liquidity is deteriorating.
The organisation said that, amid growing inflationary pressures, rising energy prices and interest rates, labour shortages and supply chain issues, demand for turnaround advice would continue to grow, with the biggest rise in the first quarter of this year.
Paperchase became the first retailer to collapse into administration this year. The brand and IP address were acquired by Tesco, but Begbies Traynor, the administrator, failed to find a buyer for its 820 stores.
Leeser, who has worked on a range of retail projects over the years, including a company voluntary arrangement for Tragus, the Café Rouge and Bella Italia operator, said that all the institute’s large advisory firms were working with retail businesses, both wholesalers and brand owners, with one large firm working with about ten well-known names. Another large advisory firm was said to be working with 60 retailers, with about 15 per cent to 20 per cent of its staff involved in the sector.
He said the institute’s members were reporting demand for support in the middle and smaller end of the retail sector.
“The expectation is that the bigger retailers are going to be a bit more resilient, but that problems will become evident in due course,” he said.
The biggest problem, he added, was that companies more generally were reluctant to appoint a turnaround adviser until cashflow pressures were extreme, which could limit the range of restructuring options available.
“There are a whole range of businesses that are very vulnerable,” he said, “and until inflation and interest rates come right down, they will continue to be vulnerable.”