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UK Businesses rally in Q3 2006
Archived article dated Thursday December 14th 2006
As the Bank of England announces that interest rates will be held for another month, Equifax, has released its Business Failures Report, which reveals that the number of companies failing continues to rise year on year.
For the year to date, business failures are up 3.4% compared to 2005. However, Quarter 3 2006 seems to have performed slightly better than the same period last year, with failures 1.4% down year on year.“Business failures continue to rise overall, despite a slight dip in Quarter 3 compared to 2005,” explains Neil Munroe, External Affairs Director, Equifax. “But the most worrying figure is the overall rise this year in businesses with a zero credit rating. This has gone up 3.5% year on year and casts a shadow over business growth as a whole. Any business with a zero credit rating is going find it very difficult to get credit, severely limiting their ability to do business.”
For Quarter 3 2006, the Services, Manufacturing, Construction and Wholesale sectors the number of failures fell compared to 2005. The Services sector performed the best with an 18.8% drop in failures for the Quarter. That sector is also doing well for the year as a whole with a 9.1% drop in failures for January to September 2006, perhaps suggesting a generally positive business economy.
The Retail sector, however, continues to see a big rise in businesses failing year on year. For Quarter 3 the number of Retail organisations failing increased 27.1% year on year and for the year as a whole failures have increased by 19.1% compared to the same 9 months in 2005. This probably reflects the ongoing pressure on consumer spending.
Munroe continues, “Retail has taken a big hit throughout 2006 as consumer confidence continues to falter. And another interest rate rise before the end of the year - highly anticipated for November - will put further pressure on this sector.”
The regional picture is also interesting with no particular divide between North and South. For Quarter 3 2006, Scotland suffered the highest increase in failures at a staggering 42% compared to the same period in 2005, contrasting with a much more positive result in the North East, which showed a decrease of 41%. The South East is still seeing an increase in failures of 1.5%, although London failures dropped by nearly 12%.
“The latest figures suggest that businesses across the UK are still in a vulnerable position,” concludes Munroe. “With interest rates set to rise and the number of businesses with a zero credit limit increasing, the end of the year is not looking particularly promising. We advise businesses to implement risk management and monitoring procedures and ensure that basic credit checks are carried out. This is especially true for smaller businesses as they are most at risk in the current climate.”
Tagged as: business failures
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