The manufacturing sector could lead the UK’s economic recovery, according to a report released on Friday by Begbies Traynor Group plc (LSE:BEG), a business rescue, recovery and restructuring specialist.
In its latest Red Flag Alert research, which monitors a series of indicators of UK company distress, Begbies Traynor has found that manufacturing is recovering while many other sectors are experiencing a tide of continued business distress across the country.
Overall, the underlying year-on-year trend shows a decrease of 17% in combined distress, indicating early progress away from another recession. In line with normal seasonal trends there were increased levels of distress in the first quarter of the year after the pre-Christmas retail and leisure spending peak. Combined instances of UK business distress increased by 55% in the first quarter of 2012 compared with the previous three-month period, which gives an indication of the potential fragility of the recovery, Begbies Traynor said.
Looking more specifically at the manufacturing sector we can see clear year-on-year falls in combined distress, with food and beverage producers’ distress levels down 37%; a drop of 73% amongst print and packaging firms; and other manufacturing businesses recording 49% fewer instances of distress. Food and beverage manufacturers achieved falls in both year-on-year and quarter-on-quarter distress, noted Begbies Traynor partner Julie Palmer.
Sectors that performed less positively in the first quarter of 2012 included property services, which showed a 122% increase in distress, and the construction sector with a 104% increase in distress as public spending cuts mean that some long-term infrastructure and construction contracts have been delayed or shelved.