Press Releases
23 August 2010
Public sector suppliers suffer surge in insolvencies as Government cuts take hold
- Insolvencies up by 47% for suppliers to public sector
- All insolvencies down by 5% in the same period!
The number of businesses supplying goods and services to the public sector going bust has leapt by 47% in the last year, says Top 22 accountancy firm Wilkins Kennedy.
Data from Wilkins Kennedy* suggests that the Government’s austerity measures are now leading to corporate failures and job losses.
There were 168 businesses in the health & social services, education and defence sector that went bust in the first six months of 2010 versus 114 in the first half of 2009.*
Corporate insolvencies as a whole have fallen by 5% over the same period!
Anthony Cork, Director at Wilkins Kennedy says: “So far the impact of the Government’s austerity drive has been most visible in the slew of profit warnings from listed companies. However, for an increasing number of companies the situation is even worse and they are being forced into insolvency.”
“Whilst the real cost-cutting that this Government has threatened has yet to take place we are already seeing a wide range of companies fail because of delayed contracts.”
“The public sector has seen tremendous growth over the past 15 years and the private sector ecosystem that surrounds it has expanded along with it. Supplying to the public sector has been seen as safe and steady, unfortunately that is no longer the case.”
“Those companies that have become too dependent on the public sector – be they in recruitment, outsourcing, construction or marketing services are beginning to feel the pain. It is not just the actual cost cuts that are causing problems but the delay by public sector bodies making spending decisions.”
Anthony Cork explains that some suppliers to the public sector that have taken on contracts from the public sector could struggle to manage down costs as the steadiness of their income over the last decade may have encouraged them to take on higher fixed costs.
Adds Anthony Cork: “A lot of suppliers to the public sector are now waiting for the other shoe to drop. It seems inevitable that the Public Sector Spending Review in October is going to heap on more pain.”
Wilkins Kennedy gives the example of care homes as a sector that has begun to experience a wave of insolvencies partly due to a reduction in spending by local authorities. Care Home insolvencies that took place in Q2 2010 include:
- Orchard Care Homes.com Holdings Ltd
- The New Victoria Hospital Ltd
- Ancyra Health Limited
- Angea Care Ltd
- Cliftonville Nursing Homes Ltd
Wilkins Kennedy says the public sector spending slowdown is likely to have resulted in even more corporate insolvencies as their figures excludes those businesses that have gone bust as a result of public sector cuts but where education or healthcare work is classified as a minority of their business.
Businesses that have suffered as a result of public-sector cuts.
Connaught
The social housing group has warned it will report a loss for the year partly due to public sector cutbacks. The company is currently in talks with banks over a possible debt-for equity swap.
Mouchels
The consulting and business services group issued a profit warning predicting that it will suffer losses until the Government spending review is announced on October 20 2010.
Southern Cross Healthcare
UK’s biggest care home operator issued a profits warning stating that it is experiencing a reduction in admissions from local authorities
RM Group
RM Group, the schools IT company issued a profit warning when the Building Schools for the Future scheme was scrapped.
Cable&Wireless Worldwide
CWW issued a warning on profits in June following the first announcement of the Government cutbacks.
ENDS
*Figures include receiverships, administrations, creditors' voluntary liquidations and company voluntary arrangements (CVA) and compulsory insolvencies (approx)
Press enquiries:
Anthony Cork
Director
Wilkins Kennedy
Tel: 020 7403 1877
Mobile: 078 8060 1962
Stephen Grant
Managing Partner
Wilkins Kennedy
Tel: 01494 54 55 70
Nick Mattison or Sarah Forsey
Mattison Public Relations
Tel: 020 7645 3636
Mob: 07931 685 714
