Small Firms Boost on Bankruptcies

by : steve ash

The first three months of 2007 saw an 8.8% rise in the amount of business failures; a sharp contrast to the same period in 2006 when the country saw its biggest rise in almost a decade.
The figures will be seen as good news for the small business sector, which has found itself under pressure in recent months from rising interest rates, new waves of employment legislation and higher energy bills.
The news that there were 430 fewer bankruptcies in the first quarter of this year should be welcomed, according to Experian, the credit-rating agency that carried out the survey. But it warned that small businesses could still face tough times ahead.
“This is the first fall in business failures during the quarter one period since 2004,” said Jo Howard, marketing director for Experian’s business information division. “However, while this fall should be welcomed, it needs to be treated with caution as past trends have shown us that dips in insolvency are often the calm before the storm, with the following quarter characterised by higher insolvency rates. This was true of 2006.
“In quarter three of 2006, there was also an improvement when business failures fell by 4.1% – followed by a 29.1% increase in the following quarter – the highest quarterly increase recorded since we started reporting. This pushed the overall increase in corporate insolvency for the year to 10.7%,” he added.
The biggest fall was in the number of businesses going into receivership, which accounted for 50.8% of the total fall, Experian figures showed. This was followed by voluntary arrangements (down by 16.8%), administration orders (down 11.8%) and voluntary liquidations (down 9.1%).
Of the 34 industries reviewed by Experian, seven recorded an increase in corporate failure, two remained unchanged and 25 recorded a decline.ï??The sectors experiencing a decline in business failures included textiles and clothing (down 30.3%), motor traders (27.5%), non-food retailing (6.2%), engineering (11%), banking and financial services (24.2%) and media (14.1%).ï??
However, instances of business failure actually increased in three areas of the country – the north-east (up 16.9%), Scotland (6.7%) and Northern Ireland (3.7%) – during the first three months of this year.