The number of businesses going under has decreased, although not as far as pre-recession levels, according to new statistics.
The Equifax Business Failures Report shows a 19% year-on-year drop for this year’s second quarter and a 7% drop compared to the first quarter. The manufacturing industry was found to be the best performing sector and the North East was the strongest region between the first and second quarters.
The manufacturing industry was found to be the best performing sector and the North East was the strongest region between the first and second quarters
Nic Beishon, head of Equifax Commercial Information Solutions, says: “Our latest Business Failures Report appears to reflect the very close control businesses have been putting on cash flow and costs. Cuts in headcount and pay freezes have been key features of the last 12 to 18 months and these strategies certainly appear to be paying off in terms of slowing down the number of businesses going under.”
But, Beishon adds: “We are not yet out of the woods – the actual number of businesses that have failed in quarter two is not quite back to the levels of early 2008 – although in some cases they are pretty close. There is much speculation about whether we are heading for a double-dip recession, but our Business Failures Report certainly seems to indicate that all the right actions are being taken by businesses to survive continuing difficult trading conditions.”
Beishon does urge caution in reviewing year-on-year figures: “Clearly we are now comparing performance with the worst part of the recession last year, so it is not surprising to see a significant improvement. But what I think is more useful is to compare this year’s figures with failures in quarter two of 2008.
“Overall, 6,409 businesses went bust in quarter two 2008 – there were 7,175 failures in Quarter 2 2010. That’s still an increase but certainly a much smaller jump than in 2009 when failures in Quarter two hit 8,874.”
The manufacturing industry saw the greatest reduction in failures quarter on quarter at almost 15% and the transport and communications sectors also fared well at 13%. However, the service sector saw just a 1% increase in failures compared with quarter one 2010.
Year-on-year all sectors saw significant reductions in the number of businesses going bust compared to the same period last year, reflecting suggesting measures taken to control costs have been largely successful.
Scotland reported the largest drop in failures, falling 31%, followed by the North East at 25% and the East Midlands at 20%.
When comparing quarter one 2010 with quarter two, the North East recored the strongest drop in failures at 20%, whereas the West Midlands saw the smallest drop in failures at just 0.1%.
Beishon says: “Businesses and trade bodies all across the UK should continue to be encouraged by the latest report, but they mustn’t take their eye off the ball.
“UK business must continue to take the right precautions to protect themselves from some of the risks of the continuing difficult trading conditions. They need to continue to use rigorous credit checks, alongside ongoing monitoring of the financial status of their costumers and suppliers.”
Beishon adds: “By operating best practise and harnessing the power of the latest risk management solutions, firms can minimise the threat of bad debt and secure the future of their business.”
