The Quarter 3 Equifax Business Failures Report reveals a drop of 13.4% in the number of businesses going bust, compared to the same period in 2009. This sustains the pattern of year on year falls in business failures for each Quarter of 2010. The Transport & Communications sector has seen a year-on-year fall of 10.3% this Quarter, however insolvencies rose by 13.6% from Quarter 2 to Quarter 3.
Looking at the UK picture, the number of failures at 6,646 for the Quarter, brings the level of business insolvency closer to that experienced in late 2007 and early 2008 when the credit crunch first took hold of the economy. However there's a bit of a way to go to reach the levels achieved during the boom years of 2004/2005/2006 when numbers were around 5,500 each quarter.
13.4% year-on-year drop for Quarter 3 2010
7.4% quarter-on-quarter drop for Quarter 3 compared to Quarter 2 2010
Wholesale saw the best quarter-on-quarter performance (19.4%) and year-on-year (19.7%) sector improvement
Transport & Communications performed the worst with a 13.6% increase in failures quarter-on-quarter
Yorkshire and Humberside sees year-on-year fall of 20.7% and quarter-on-quarter numbers down 10.6%
33.1% year-on-year drop for Scotland - the best performing region
West Midlands best Quarter 3 to Quarter 2 performance, down 15.7%
"There is no question that the economy is still fragile, and there is much anticipation about the impact of the Government Spending Review and the VAT increase in January" said Nic Beishon, Head of Equifax Commercial Information Solutions. "But we are hugely encouraged by our latest analysis of the Business Failures data which suggests a really close focus by all sorts of organisations to keep control on their costs, tackle late payments and bad debts and manage their cash flow.
"Interestingly, the downward trend in failures has been sustained quarter-on-quarter through the year, but the Transport & Communications sector didn't reflect this with a 13.6% increase, illustrating the need for vigilance across all sectors. Across the UK, Quarter 1 saw a 0.5% drop in failures compared to Quarter 4 2009, followed by a more significant 7% drop in Quarter 2. And business performance for Quarter 3 has sustained this pattern with a 7.4% quarter-on-quarter decline in businesses going bust."
Wholesale performs the best in the sectors
The Transport & Communications sector contradicted the downward trend in all other markets with a 13.6% increase in failures quarter-on-quarter, although the numbers overall in this sector are quite small and the pattern was certainly not repeated year on year, with a 10/3% decline.
For Quarter 3, compared to the second Quarter, the Wholesale sector showed the greatest decline in failures at 19.4%. The Manufacturing and Services sectors also appear to have managed sales, debts and cash flow well in Quarter 3 with 12.5% and 11.9% declines in failures respectively.
The Regional Picture
In the regions the strongest performers for Quarter 3 versus Quarter 2 were the West Midlands, showing a 15.7% drop in failures and London with a 14.3% fall in businesses going under.
The East of England, at 13.6% and Yorkshire & Humberside also performed well in Quarter 3, defying any suggestion of a North/South divide in the way the economy is holding up. Indeed, the South East, which generally has performed better in previously difficult times showed only a 6.5% fall in failures.
"Government, businesses and trade organisations right across the country should continue to be buoyed by our latest Business Failures report", concluded Nic Beishon. "But as the quarter-on-quarter performance in some regions and sectors shows, they can't afford to take the focus off applying the most stringent credit management processes.
"The importance of monitoring existing customer performance can't be under-estimated because the knock-on effect of one organisations failure can ripple throughout a region or sector very quickly. 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 own business."