Business failures fall in the UK

The number of firms going bust declined for the first time in two years, analyst claims

For the first time in two years, business failures declined according to the latest figures from market watcher Experian.

Business failures in the UK fell by 4.1 per cent to 4,611 during the third quarter of 2006, compared to the same period in 2005, bringing the total for the year so far to 14,216. However the IT industry experienced a 4.22 per cent increase during Q3 with 173 business failures reported, compared to 166 the year before.

“The improvement in failure rates is well and truly welcomed and it provides an indication that things are picking up," said Richard Lloyd, managing director of Experian’s Business Information division.

The UK suffered its biggest increase in business failures since 1999 during the first quarter of 2006 with 4,818 firms going under. The slowdown in the rate of business failure began during the second quarter and has continued with the latest quarter showing an overall fall of 4.1 per cent.

"However, during the year to date, there has actually been an overall increase in business failure of 4.4 per cent during the first nine months of the year compared to the same period in 2005. This illustrates that a very mixed picture is emerging and until the end of the year, we won’t know for certain which way the business failure pendulum will swing," added Lloyd.

Experian's latest figures also showed that compulsory liquidation had fallen by 10.9 per cent compared to the third quarter of 2005; receiverships were down 59.4 per cent and voluntary arrangements down 3.8 per cent. In contrast, voluntary liquidations were up by 2.5 per cent, and administration orders increased by 4.9 per cent compared to the same period in 2005.

“While the message about the importance of businesses checking the creditworthiness of their customers and potential prospects is getting through, you can’t disguise the fact that looking at 2006 so far, business failures are still on the increase. As a result, businesses cannot afford to be complacent and must ensure that they protect their business and their employees from the threat of insolvency," said Lloyd.