From logistics to automotives, what will be the industry pinch points in 2019?
PUBLISHED: 10:09 10 January 2019 | UPDATED: 10:09 10 January 2019
New data has revealed that the number of companies entering into administration is once again on the rise as Brexit uncertainty takes its toll.
According to the analysis from the London Gazette, the number of companies entering into insolvency during October 2018 was the largest monthly total (131) for almost five years - since February 2014 which saw 145 insolvencies.
Steve Elsigood, head of restructuring for KPMG’s East of England practice, talks us through the industries he believes are most at risk.
On the retail and casual dining sector, Mr Elsigood said: “Consumer attitudes towards spending are changing, whether it be shopping online, continued uncertainty around Brexit or workers feeling squeezed on their wages. For any company operating on the high street, increased costs of the living wage, business rates and rising costs have turned these pressures into something of a perfect storm.”
Mr Elsigood and his East of England team operate out of two offices in Norwich’s Gilders Way and Cambridge.
Another sector he identified as under pressure were domestic energy suppliers. He said: “2018 saw a sudden spike in the number of smaller domestic energy suppliers falling into administration.
“Opening up competition is undoubtedly a good thing. However, the fact remains that a majority of challenger suppliers are relatively young, and need to reach a critical mass of customer numbers within a relatively short period of time in order to be viable.
“Some have been selling at a low or even loss-making margin to attract customers. The size of the market for domestic energy supply is limited by the number of households in the UK, so competing solely on the best price is a zero-sum game.”
“The logistics and parcel sector is another that is in a period of unprecedented disruption,” Mr Elsigood said.
“The rise of the gig economy, arrival of new entrants and ever-greater consumer demands continue to create sustained operational and financial pressures. Rising fuel and tyre costs continue to squeeze margins, and the industry faces people challenges too – it employs a significant volume of non-UK employees who may be impacted by Brexit.”
Mr Elsigood continued: “Companies who operate in the automotive sector will also be feeling the impact of fragile consumer sentiment.
“The increased take-up of electric vehicles and the move away from diesel is undoubtedly changing the sales mix. Over the longer term the use of autonomous vehicles and mobility as a service is likely to lead to overall significantly lower volumes of car sales.”
He concluded: “We expect there to be consolidation in the market, which may start to feed through to insolvencies. Motor dealerships, smaller family-owned businesses, or those in the mid-market sector should start considering their longer term strategies and business plans.”