As two more UK packaging firms fall into administration, business analysts predict the number of UK insolvencies will reach 55% by the end of 2009, with 215 packaging materials companies at high risk of failure.

In the last two months, corrugated packaging manufacturer Joseph Pickering & Sons, based in Sheffield, and paper and plastics packaging firm Chevler Packaging, based in Princes Risborough, have fallen into administration. Chevler has since been sold, while the assets of Joseph Pickering are up for sale.

Industry analysis firm Plimsoll Publishing, based in Stockton-on-Tees, UK, has published a report advising the most vulnerable packaging firms on what steps they can take to avoid going under.

Plimsoll says failing businesses often start using all their resources, or even selling at a loss, to service client demands. They also take on extra short-term debts to finance this sales drive, cutting into profit margins. Banks then pressure the firm to switch unsecured finance to long term finance, and the debt grows to an uncontrollable level as the company tries to maintain sales. Banks see the debt growing and demand immediate repayment. If the company cannot pay, the administrators are called in.

Plimsoll says the key to avoiding insolvency is to cut costs immediately, which can involve stopping non-profitable contracts and creating some job losses. This will create a smaller company, but one that is cheaper to manage, with a higher chance of survival. Another option is to sell the company or look for an investor, as some larger firms could inject new resources.

On the other hand, UK packaging has received some boosts from foreign investments. Polish company Can-Pack Group has begun producing 44cl cans at its newest plant in Scunthorpe, UK. The facility, which employs 180 people, will aim to produce a billion cans for the UK market every year.

Meanwhile, Neville and More, based in Southwater, UK, has signed a deal to distribute global company Graham Packaging Plastics’ PET beverage countainers.

Further information: Canpack, Neville and More, Graham Packaging, Plimsoll