Business failures still growing, but slowing

Research by Equifax shows that 8,678 UK businesses bit the dust between January and March 2009 compared with 6,427 over the same period in 2008. While this represents a huge spike in year-on-year numbers, the figure was only 3.3% higher compared with the last quarter of 2008. The number of business failures grew by 24.2% between Q3 and Q4 2008 (the fourth quarter of each year appears to be when the biggest surge in company failures takes place).

“We seem to be seeing a slowdown in what was a runaway train of failures at the end of last year,” says Neil Munro, a spokesman for Equifax.

Construction has been the hardest hit sector in the UK since business failures there started increasing at the close of 2007, ballooning 65.2% in Q1 2009 compared with the same period in 2008. The services sector is holding up slightly better with a 16% increase in failures in the first three months of 2009 compared with the same period last year.

“While the comparisons between Q4 2008 and the first three months of this year [for overall business failures] show some slowing down of the very high levels of failures we were seeing last year, it is clear more action is needed from government and the banks to inject funds into the economy as a whole ­ both to encourage consumer confidence and help businesses with important cashflow support,” says Equifax’s Munro.

“It is also crucial that businesses that are holding their own take the right precautions to protect themselves from some of the risks of these exceptionally tough trading conditions.”

Geographically, the northeast has seen the biggest rise in company failures with an unprecedented 82.9% rise year-on-year. The southeast saw a 47.5% year-on-year increase in failed businesses. In London, business failures were up by 21.9% in the quarter compared with 2008.