The Retail and Services sectors have suffered the highest levels of business failure compared to the same period last year. Business failures in the Retail sector increased by 19% and in the Services sector by 14%.
The regional picture of business failures also shows a worrying trend with increases across almost every region in the country. Wales had the highest increase at 35% compared to Quarter One 2005. Business failures in the West Midlands rose by 23% and in the East of England by 18%. And London and the North West also saw increases in failures year on year at 15% each.
The East Midlands was hit by an 11% increase in business failures with the South East and South West increasing by 10% and 9%. Yorkshire and the Humber each showed a 7% rise in business failures, but the North East fared better with just a 2.5% increase year on year. Scotland and Northern Ireland were the only regions in the UK that had a drop in business failures compared to Quarter One 2005.
Other market sectors have also experienced increases in business failures, although not as significant as the Retail and Service sectors. The Equifax findings show increases of 8% and 7% respectively for the Construction and Transport & Communication sectors. The Manufacturing sector, however, saw only a 4% increase in failures and failures in the Wholesale sector increased by just 1%.
In light of these latest figures, Equifax is urging companies to protect themselves by implementing risk management procedures, including basic credit checks. And it is warning that smaller businesses could be particularly vulnerable in the current economic climate.
Neil Munroe, external affairs director, Equifax explained: “Smaller businesses are more vulnerable to the impact of bad debt and fraud, yet many of these organisations fail to take even the basic steps to protect themselves.
“To avoid business failure, SMEs can benefit from the latest online tools, allowing them to check a customer’s current credit worthiness instantly, so that they know exactly who they are doing business with. Plus email and SMS alerts mean changes to an account such as CCJs, new directors or a credit limit change, come straight to their desktop, allowing them to respond to changing business and financial conditions of customers and suppliers quickly.
“The importance of data sharing cannot be overestimated in helping businesses avoid bad debt and fraud. Equifax plays a key role in creating credit communities to enable businesses to share critical default information about their customers instantly. Sharing critical and timely information such as bounced cheques, CCJs and letters before action enables SMEs to monitor changes in the financial status of key customer and suppliers. Armed with this information SMEs can react quickly and effectively manage risk and minimise the threat of bad debt – securing the future of their business.”
