Peter Mandelson said that reform of the bankruptcy laws is needed to foster entrepreneurialism in the UK. Speaking at the British American Chamber of Commerce in New York, the secretary of state for trade and industry said: “We fundamentally need to readdress our attitude towards business failure. Rather than condemning it and discouraging anyone from risking failure, we need to encourage entrepreneurs to take further risks in the future.”
He said that some US investors preferred to back businesspeople “with one or more failures under their belt because they recognise the experience that has been gained.” Mandelson criticised UK creditors for not supporting those who have “experienced” business failure.
He added that the global economic problem was not “a crisis for our economies, despite the efforts of some in the media”.
His promise of business failure law reform comes as recent indicators point to a worsening of the outlook in the UK:
– Dun & Bradstreet reported that business failures in the third quarter of 1998 were almost 18% higher than the similar period last year. The second quarter saw a 4.3% rise, while Q1 fell 12.4%. So far this year, business failures are running 2.8% ahead of the first nine months of 1997.
– Consultancy Business Strategies warned that 350,000 manufacturing jobs will be lost between March this year and end-1999.
– Ernst & Young reported a sharp increase in the number of profits warnings from quoted companies, biased towards manufacturers and the southeast.
– The CBI Industrial Trends survey found that manufacturers’ orders have slipped to the lowest level in five and a half years.
– The Institute of Credit management warned that, because of deteriorating conditions, credit managers were “under pressure to extend more credit on better terms to riskier customers.” It added that one problem in assessing creditworthiness was “the quality of bank or trade references.”
Predicting business failure, p 32
Credit management case study, p 42.
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