Optimism as business failures fall
Lowest level since the third quarter of 2001, says credit firm
Business failures have dropped to the lowest level since the third quarter of 2001, according to figures from credit firm Experian, prompting some industry watchers to forecast a recovery.
Experian claimed the number of companies going out of business has fallen for three consecutive quarters.
The latest figures showed a drop of 12.2 per cent - a marked contrast with Q3 2002, when the number of failures rose by 11.6 per cent.
Phil Cotter, managing director of Experian's business information division, said the fall in the number of business failures reflected signs of an economic recovery in the UK.
He said the Office of National Statistics showed the economy was stronger in the first two quarters of the year than was previously thought.
A marked rise in new corporations has also been noted as individuals who would have previously traded as sole traders have formed limited companies.
Cotter added: "It is too early to predict the impact of this on future insolvency rates."
Nitin Joshi, partner of insolvency practitioner PKF, questioned the extent of the channel's recovery.
"Our own anecdotal experience is that failures are running high, and one needs to broaden the definition of what a channel business is," Joshi said.
Peter Brooker, a spokesman for Experian, said the fall in the number of company failures was important, showing that resellers' customers were doing better.
"The less companies that go under, the less bad debt. However, it's a dangerous period in the economy. As it appears to be turning around, people gear up. The biggest increase in corporate failures tend to occur after the economy turns," he said.