Drop in business failure gets cautious welcome
Market watcher identifies the first Q1 decline in company failure rate for four years
The IT industry has seen a drop in first-quarter corporate failures for the first time in four years, according to market watcher Experian.
Total corporate failures in the UK fell by 8.8 per cent during Q1, with the IT sector experiencing a drop of 9.3 per cent. Experian claimed the IT sector saw 165 business failures in Q1 compared with 182 in the same period a year ago.
Last year Experian claimed the UK experienced a record number of corporate failures (20,067), and has warned against getting carried away by this quarter’s positive news.
Jo Howard, marketing director for Experian’s business information division, said: “This is the first fall in business failures during a first quarter period since 2004. However, while this should be welcomed, it needs to be treated with caution as past trends have shown us that dips in insolvency are often the calm before the storm, with the following quarter characterised by higher insolvency rates.”
The channel has already seen the demise of Watford Electronics and Relisys Digital this year, and with late payment periods in the IT sector growing worse many believe there could be more casualties during 2007.
Dennis Scott, commercial director of e-business Credit Manager (e-bcm), an online credit and debt-management service, said: “If companies paid on time we wouldn’t experience half as many insolvencies. A publicly available list of firms that are renowned late payers would encourage better payment practices.”