News

July 16, 2010

Business failures down by almost a fifth on last year

Business owners’ measures to preserve cashflow and cut costs have helped reduce the number of firms going bust over the last year by almost a fifth, credit reference agency Equifax has claimed, writes Kate Horstead

Equifax’s Business Failures Report,, which includes data on businesses of all sizes, also found that the number of business closures fell by seven per cent between the first and second quarter of 2010, to 7,175. The survey defined business failures as firms which have gone insolvent.

Equifax head of commercial information solutions, Nic Beishon, said that the contingency measures firms have put in place to adapt to the difficult trading conditions have helped reduce the overall number of closures.

“Our latest report appears to reflect the very close control businesses have been putting on cashflow and costs,” he said. “Cuts in headcount and pay freezes have been key features of the last 12 to 18 months and these strategies certainly appear to be paying off in terms of slowing down the number of businesses going under.

“There is much speculation about whether we are heading for a double-dip recession, but our report certainly seems to indicate that all the right actions are being taken by business to survive continuing difficult trading conditions,” added Beishon.

However, British Chambers of Commerce (BCC) spokesman, Sam Turvey, said that the main reason that business failures had dropped was that economic conditions have improved. “There have already been a lot of business failures,” he said. “The most vulnerable firms have either already gone bust or been bought out or closed.

“In addition, a lot of the recent economic data shows that the economy is on the road to recovery, and sectors such as manufacturing are strengthening although service firms are still struggling,” added Turvey.

The Equifax survey reflected this, revealing that business failures in the services sector increased by 1.3 per cent in the second quarter of this year, while the manufacturing sector saw a 14.9 per cent drop in failures in the same period.

Turvey said that overall businesses had been rapid to recognise the economic problems that were coming and quick to adapt. “They have already made tough decisions on wages and recruitment in order to cope,” he said.

“Businesses need to be even more savvy with their finances during the next year or two as conditions will continue to be tough,” added Turvey. “But if the Government avoids introducing policies that inadvertently burden small firms, there is no reason why businesses shouldn’t start investing in growth again, and we could see better times sooner than we think.”