Fewer food and drink firms are falling into administration despite the tumultuous grocery market conditions, new data has revealed.
A study by Grant Thornton found the number of industry business failures has fallen in recent months and a growing proportion of companies entering administration are being rescued rather than dissolved.
A total of 70 companies went into administration in 2012, but that number plummeted to 45 last year. The downward trend has continued into 2014, with only 21 companies calling in the administrators in the first half of the year.
Of those firms to have entered administration so far this year 38% were subsequently acquired, compared with 28% in 2013. Examples so far this year include Fabulous Bakin’ Boys, the Oxfordshire-based bakery business bought by Dutch baker Daelmans Group in April, and Autobar, the food and drink vending machine company that private equity firm CVC Capital Partners sold to a consortium of US creditors in a ‘debt for equity’ deal last month.
Trefor Griffith, partner and head of food and beverage at Grant Thornton commented: “Against the backdrop of a weak grocery market, it is encouraging to see that fewer food and beverage companies are falling into administration and that a good number have been acquired.”
Although falling grocery sales and the growth of the discounters have made life increasingly difficult for a lot of UK food and drink manufacturers, pressure has been eased by the continuation of historically low UK interest rates.
Grant Thornton also highlighted how debt pricing has recently become more advantageous and more non-bank lenders are entering the market and offering longer-term financing options.
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