Business Failures rise by a 3rd
The number of UK businesses going bust increased by 29% in July compared with the same month last year, research by credit rating firm Equifax has revealed.
The research from Equifax found that the transport and communication sector was worst hit, with a 59% increase in business failures compared with 2007.
The next worst hit was the construction industry where failure increased by 57%, manufacturing (39%) and retailing (33%). The service sector has suffered the least – with only a 12% increase in failures compared with last year. Equifax head of commercial solutions Nic Beishon said:
“With the price of fuel spiralling even higher, many businesses are starting to feel the pinch as overheads continue to soar. The property downturn has also had an impact on the construction sector, while a slowdown in consumer spending has hit the retail sector.”
According to Equifax external affairs director Neil Munroe, it is vital that SMEs retain a firm hold on their finances in the current climate.
“As SMEs form a significant number of the businesses in this country, it is fair to say that a fair number will be suffering as a result of the downturn,”.
“There is a temptation not to spend money on checks of new customers and suppliers, but the fact is that rigorous credit checks are key to help SMEs protect their cashflow and avoid bad debt,” added Munroe.
Accountancy firm Grant Thornton’s recovery and re–organisation partner, Nick Wood, agreed that a combination of financial discipline, recognising early warning signs and taking advice was the way to survive in tight trading conditions.
“Well–managed businesses with strong cash flows can certainly survive, and even prosper in the current climate,” said Wood. “Cash is king in these turbulent times.”