Business failures are slowing down, says report

THE number of Yorkshire business failures rose by 35% during the first quarter of 2009 compared to the previous year, according to business information firm Equifax.

But the number of firms going under during quarter one compared to quarter four, 2008 only rose by 3.3%.

The latest business failure survey reveals a gloomy picture nationwide with only Scotland managing to maintain a drop in year-on-year failures of 18.6%.

The North East (which includes Yorkshire and Humber) saw the biggest percentage rise to a phenomenal 82.9%, but the report’s authors said that there were only a relatively small number of failing businesses in the region overall.

The regions with higher numbers of companies failing also saw significant increases year-on-year including the South East at 47.5%, the North West 41.1%, the West Midlands at 34.2% and London at 21.9%.

Equifax said that several regions including London and the South East saw a small increase in business failures from quarter four, 2008 to the last quarter – a similar trend to Yorkshire.

Neil Munroe, external affairs director of Equifax, said he didn’t believe the figures would surprise anyone.

“It is hardly surprising that year on year the level of failures has increased so significantly” said Mr Munroe.

“At the beginning of last year we were only just starting to see the impact of the credit crunch and certainly the word ‘recession’ had not yet been uttered. But obviously things have been very different at the start of this year with consumer confidence really struggling to lift.”

He said however that there was a slowing down in the “run-away train” of failures at the end of last year.

“It would be immensely dangerous to take too much from just one Quarter’s performance, but it is a useful benchmark to watch in the coming months,” he continued.

The report found that the construction sector continued to report the greatest level of failures with a 65.2% like-for-like rise.

That said, the figure only rose 15.3% from quarter four, 2008 to the last quarter.

The manufacturing and retail sectors also saw a significant year of failures at 44.4% and 44.8% respectively.

However, once again the numbers slowed since the final quarter in 2008 by 15.7%.

Mr Munroe said that it was crucial that those businesses holding their own took the right precautions to protect themselves from tough trading conditions.

“They need to continue to use rigorous credit checks, alongside ongoing monitoring of the financial status of their customers and suppliers,” he said.

“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.”