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UK manufacturing sector holds the line as bad debt looms, data from Creditsafe reveals

15-Jan-2018
UK manufacturing sector holds the line as bad debt looms, data from Creditsafe reveals
Building on its recovery last quarter, the UK manufacturing sector has posted another solid performance across key financial indicators, as sales rose 3.94% and active companies increased by 16.66% year-on-year, according to new figures from the Creditsafe Watchdog Report. Growth was overshadowed by a 260.24% increase in bad debt owed to companies in Q4 compared to Q3, and an 8.67% rise in CCJs (County Court Judgments) over the same period.

The Watchdog report tracks quarterly economic developments across Manufacturing and 11 other sectors (Banking & Financial, Farming & Agriculture, Hospitality, IT, Construction, Professional Services, Retail, Sports & Entertainment, Transport, Utilities and Wholesale).

In addition, company failures dropped by 1.06% in Q4, dwarfed by the overall decrease of 30.79% compared to a year earlier. Meanwhile the two fastest growing companies in Q4 were Nissan Motor Manufacturing (UK) Limited and British Steel Limited suggesting that financial health is returning to the traditional roots of the industry.

Year-on-year, the sector saw bad debt owned by industry suppliers fall by 35%, while money owned by manufacturing companies to other sectors rose to 200.05% in line with figures seen for the last three months of the year.

Rachel Mainwaring, Operations Director at Creditsafe, commented: “While there is certainly cause for cautious optimism as we see the financial health of the UK’s manufacturing base strengthen for a second consecutive quarter, there has been a large increase in bad debt owed by the sector that we should be wary of.

“CCJs are also up across the manufacturing sector suggesting that there may be some contagion in unpaid bills. We’ll be keeping a close eye on this as we look to the next quarter, hoping for positive improvement in terms of overall debt in the industry.”

For the food manufacturing industry specifically, the figures reflected the broader industry, indicating a positive trajectory in the numbers. Growth in new companies was down to 790 for the quarter, however, marking a reduction of 11.73% from Q3, and Creditsafe’s risk ratings showed an 11.22% increase in companies entering the very high risk band.

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