However, the pace of failures appeared to have slowed down compared to earlier in the year. But the rise in the number of businesses with a zero credit limit and therefore unable to obtain new finance to support their business has gone up by nearly 3 per cent compared to the same period in 2005.
Figures up to July 2006 showed that overall 3.5 per cent more businesses failed from January to July 2006 than in January to July 2005.
The retail sector appeared to be faring worst at 14 per cent, with transport & communications showing a 6 per cent increase in failures and construction 4 per cent. However, the manufacturing and services sectors both appeared to be performing better in 2006, each showing a 7 per cent decline in business failures year on year.
“The sectors that have fared particularly well in the Spring and early Summer are those that have probably benefited the greatest from a general upturn in consumer confidence,” confirmed Neil Munroe, external affairs director, Equifax. “However, the interest rate rise could put paid to that confidence in the second half of the year, which could have a serious impact on these sectors.”
There did not appear to be any obvious North-South divide with the East Midlands, North West, Scotland and Northern Ireland all showing drops in business failures, whilst Wales, the West Midlands, Yorkshire & Humber show the highest increases year on year.
“What our figures seems to suggest is that business prosperity is still quite fragile across the UK,” confirmed Neil Munroe. “And when you see that the number of businesses with a zero credit limit has also increased there should be a concern that business growth is going to be difficult to achieve in the second half of the year.”
With the prospect of a further interest rate increase later this year, Equifax has urged companies to protect themselves by implementing risk management procedures, including basic credit checks. In particular, Equifax believed smaller businesses were most at risk in a tough market.
