Number of business failures drops, but not to 2008 figures

The reports key numbers
19.1% year on year drop for Quarter 2 2010 compared to Quarter 2 2009
7% drop for Quarter 2 compared to Quarter 1 2010
North East the best performing region comparing Quarter 1 to Quarter 2 2010
Manufacturing the best performing sector Quarter on Quarter
Services sector sees small (1.3%) increase in failures Quarter on Quarter
Equifax comment: “Our latest Business Failures Report appears to reflect the very close control businesses have been putting on cashflow and costs” explained Nic Beishon, Head of Equifax Commercial Information Solutions.  “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.
“But we are not yet out of the woods – the actual number of businesses that have failed in Quarter 2 is not quite back to the levels of early 2008 – although in some cases they are pretty close. 
“There is much speculation about whether we are heading for a double-dip recession, but our Business Failures Report certainly seems to indicate that all the right actions are being taken by business to survive continuing difficult trading conditions.”
When compared to the first three months of this year, there was a 7% drop in businesses going under in Quarter 2 2010.  And compared to the same period in 2009, the decline in failures was a significant 19.1%.  But Nic Beishon does suggest caution in reviewing the year on year figures. 
“Clearly we are now comparing performance with the worst part of the recession last year.  So it is not surprising to see a significant improvement.  But what I think is more useful is to compare this year’s figures with failures in Quarter 2 2008.  Overall 6,409 businesses went bust in Quarter 2 2008 – there were 7,175 failures in Quarter 2 2010.  That’s still an increase but certainly a much smaller jump than in 2009 when failures in Quarter 2 hit 8,874.”                            
Regional Analysis
Scotland was the best performing region with a  31.9% drop in failures, followed by the North East at 25.9% and the East Midlands at 20.6%. 
The North East was the strongest performer with a 20.4% drop. The West Midlands saw the smallest drop in failures quarter on quarter at just 0.1%. The East of England and the South East also did not see particularly strong improvements in business fortunes in Quarter 2 with just 2% and 3% drops in failures respectively.
Sector Analysis
In the business sectors, it was the Manufacturing industry that saw the greatest reduction in failures quarter on quarter at 14.9%.  The Transport & Communications sector also fared well at 13.9%.  But the Services sector saw a small (1.3%) increase in failures compared to Quarter 1 2010.
Year on year, the Transport & Communications sectors saw the greatest improvement in failures with a 34.2% drop compared to Quarter 2 2009.  However, all the sectors saw significant reductions in the number of businesses going bust compared to the same period last year, reflecting the focused approach that commerce has been taking to managing costs and cashflow during the recession.
“Businesses and trade bodies all across the UK should continue to be encouraged by our latest Business Failures report”, concluded Nic Beishon. “But they mustn’t take their eye off the ball. 
“UK businesses must continue to take the right precautions to protect themselves from some of the risks of the continuing difficult trading conditions. They need to continue to use rigorous credit checks, alongside ongoing monitoring of the financial status of their customers and suppliers. 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.”