Corporate failures in decline in IT industry
Research reveals that number of business failures in IT sector is lower than UK average
The number of corporate failures in the IT sector dropped by 33 during the first half of this year, representing a 9.6 per cent fall compared with the first half of 2006, according to market watcher Experian.
This was better than the overall UK picture, which saw corporate failures decline by 6.9 per cent to 8,930 during the first six months of 2007, compared with 9,592 in the same period last year.
During the second quarter there was an overall UK drop of 4.9 per cent, with 230 fewer failures recorded, compared with the second quarter of 2006. In the IT space, 144 firms went under compared to 161 in Q2 2006 – a fall of 10.6 per cent.
Jo Howard, marketing director for Experian’s business information division, said: “This year started well, kicking off in Q1 with the biggest fall in corporate insolvencies for four years. But while it’s great that the April-June period has seen the year-on-year trend continue, there was still a small increase in the number of businesses failing compared with the first quarter of 2007.
“Particularly worrying is the level of failures among the leisure and retail sectors because these sectors tend to be barometers of the financial health of the nation,” she added.
However, Clive Longbottom, service director at analyst Quocirca, was dubious about the findings.
“In the 1990s there was a massive explosion of IT start-ups, which primarily all went bust in the early 2000s,” he said. “There haven’t been many start-ups in IT since then so there are obviously less IT companies to fail. There has also been the likes of Google coming along buying up the smaller players who probably would have gone bust if they had not been acquired.”
Mike Lawrence, managing director of VAR Bentpenny, also questioned whether the UK IT sector really is seeing a decline in the number of failures. “One of our suppliers has recently gone under and several independent computer shops opened in my town, none of which have lasted more than four months,” he said. “I think a lot of smaller firms that fail slip under the radar.”