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News - 28 April 2011

Is the north south divide closing?

Businesses in the South East of England are under increasing pressure with the region suffering from an acceleration of insolvent companies going into administration over the past year. The South East (excluding London) has seen an increase in administrations of 32% year on year (Q1 2010 to Q1 2011).

Particularly hard hit are the services sector with 30% and construction with 22% increases. The last year has seen a specific squeeze on these sectors as contracts decline or cease altogether and more services are taken in house. Combine this with the harsh winter weather conditions of Q4, coupled with a tightening of consumer spend post Christmas and it has been a tough market to operate in.

The figures show overall administrations fell 8.2% across England in Q1 2011 compared to the same period in 2010. However, despite this fall individual region’s relative performance has been extremely varied. The only area to perform worse than the South East is East Anglia with a 41.2% increase on last year.

Meanwhile the North and the Midlands have seen a fall in the number of administrations. Is this an indication that the south east is suffering from neglect while all Government efforts to support businesses have been focused on the north of the country? Or is it just a blip rather than a trend?

Matt Wild, partner at Baker Tilly Restructuring and Recovery LLP in the South East says, “These figures show a reversal in fortunes when comparing the North and South in previous quarters, but it may be too soon to say whether this is an emerging trend. Traditionally the South East has been the first to recover alongside London as the services sector is strongly predominant in the region.

“Q1 is typically a challenging time of the year for many businesses. Combined with other challenges, the 0.4% decline in GDP indicates further unforeseen pressure on the economy. Less surprising is that the retail sector has struggled as Q1 brings tougher conditions post Christmas, such as less spending power and tighter household budgets.”

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