UK businesses hold steady despite economic turbulence

Equifax Business Failures Report reveals levelling out in firms going bust from Quarter 1 to Quarter 3 2008

Leading business information provider, Equifax, has released its latest Business Failures Report. Not surprisingly, there are increases in the number of businesses going bust in some sectors, but the overall picture for the year to date suggests that other sectors are faring better. The worst hit was the Manufacturing sector, which saw a 13.8% increase in the number of businesses failing in Quarter 3, compared to Quarter 1. However, the Services and Wholesale sectors both saw failures drop by 4.2% and 2.6% respectively in Quarter 3, compared to the beginning of the year.

“Whilst there is clearly immense pressure on businesses with increased costs all-round, it appears that some sectors have been taking the right precautions to manage cashflow and avoid the risk of bad debt and this is enabling them to stay solvent”, confirmed Neil Munroe, External Affairs Director, Equifax.

The Construction and Transport & Communications industries continued to struggle in the difficult financial climate with failures up 11.7% and 11.9% in Quarter 3, compared to the first Quarter of 2008. “Although there are increases in these sectors, the trend through this year is pretty steady”, continued Neil Munroe. “And significantly, failures in the Retail sector only increased by 2.8% in Quarter 3 compared to Quarter 1.

“Indeed, the overall increase across all sectors for Quarter 3 is just 3.2% compared to the beginning of the year, but the 0.5% cut in interest rates will be a welcome lifeline for businesses in all sectors as the conditions remain tough.”

Looking at the regional picture, the North East appears to be suffering the most with a 23.4% increase in failures in Quarter 3 compared to Quarter 1. However, the region saw an only 1.9% rise in Quarter 3 compared to Quarter 2. Wales saw an increase of 14.7% in the third Quarter compared to the beginning of 2008. However, between Quarter 2 and 3 business failures in the Principality only increased by 2.9%, suggesting a slowdown in failures towards the end of the year.

The West Midlands and the South East saw Quarter 3 failures go up by 10% and 10.6% respectively, compared to Quarter 1, while Yorkshire & Humberside only saw a 7% increase.

However, on the Eastern side of the country things appeared to be slightly more stable. The East Midlands and East England saw failures drop by 1.3% and 4% respectively in Quarter 3 when compared to Quarter 1. The prospects in Scotland also look positive with just a 0.3% rise when comparing the start of the year with the third quarter.

Other regions faring well in Quarter 3, compared to Quarter 1 include London (+2.2%), the South West (4.6%) and the North West (5.7%), all experiencing fairly small increases.

Munroe concludes, “Although business failures continue to rise and there are a number of external factors that can hit even the most well prepared business, there are indications that firms in some sectors are taking the right precautions to protect themselves from some of the risks in tough trading conditions. Businesses need to continue to use rigorous credit checks, alongside ongoing monitoring of the financial status of their customers and suppliers. By operating best practice 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.”

Equifax 2008 UK Business Failures Report – Quarterly Trends Comparison

The following tables show the trends in business failures for each Quarter of 2008

SECTORS

Increase or decrease in failures through 2008

	Quarter 2 compared to Quarter 1	Quarter 3 compared to Quarter 2	Quarter 3 compared to Quarter 1
Construction	-2.7%	+14.8%	+11.7%
Manufacturing	-2%	+16.1%	+13.8%
Wholesale	+1.5%	-4%	-2.6%
Services	-5.3%	+1.2%	-4.2%
Retail	-4.6%	+7.7%	+2.8%
Transport & Communications	-.08%	+12.8%	+11.9%
TOTAL PER QUARTER	-3.6%	+7.1%	+3.2%

REGIONS
Increase or decrease in failures through 2008

	Quarter 2 compared to Quarter 1	Quarter 3 compared to Quarter 2	Quarter 3 compared to Quarter 1
East Midlands	-0.5%	0.8%	-1.3%
East England	+2.8%	-17.9%	-4%
London	-3.4%	+5.9%	+2.2%
North East	+21.1%	+1.9%	+23.4%
North West	-1%	+6.8%	+5.7%
Scotland	+6.3%	5.6%	+0.3%
South East	+5.3%	+4.5%	+10.6%
South West	-4.6%	+9.7%	+4.6%
Wales	+11.5%	+2.9%	+14.7%
West Midlands	-5.3%	+16.2%	+10%
Yorkshire & Humberside	-8.7%	+17.3%	+7%

UK businesses hold steady despite economic turbulence

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