Business failure levels increase by 3.5%

Equifax says figures up to July 2006 show that overall 3.5% more businesses failed from January to July 2006, than in January to July 2005.

It also reveals that UK businesses struggle to obtain new finance
with nearly 3% rise in zero credit limits.

The retail sector appears to be faring worst at 14%, with transport and communications showing a 6% increase in failures and construction 4%.

However, the manufacturing and services sectors both appear to be performing better in 2006, each showing a 7% decline in business failures year on year.

Neil Munroe, external affairs director, Equifax, says: The sectors that have fared particularly well in the Spring and early Summer are those that have probably benefited the greatest from a general upturn in consumer confidence.

However, the interest rate rise could put paid to that confidence in the second half of the year, which could have a serious impact on these sectors.

The regional picture of business failures is also quite interesting.

There doesnt appear to be any obvious North-South divide with the East Midlands, North West, Scotland and Northern Ireland all showing drops in business failures, whilst Wales, the West Midlands, Yorkshire & Humber show the highest increases year on year.

What our figures seems to suggest is that business prosperity is still quite fragile across the UK.

And when you see that the number of businesses with a zero credit limit has also increased there should be a concern that business growth is going to be difficult to achieve in the second half of the year.

With the prospect of a further interest rate increase later this year, Equifax is urging companies to protect themselves by implementing risk management procedures, including basic credit checks.

In particular, Equifax believes smaller businesses are most at risk in a tough market.