Business failures fall nearly 20 per cent

Report shows positives but warns UK is not out of the woods yet

The latest Business Failures Report from credit reference agency Equifax shows a 19.1 per cent year on year fall and a drop of seven per cent during the second quarter compared the first three months of 2010.

A total of 7,175 businesses went bust between April and June, according to the report, falling from 8,874 in the same period during 2009.

The report shows that the services sector suffered the highest level of corporate failures in the second quarter, reaching 1,938, but still falling from 2,247 year on year. Transport and communications was the best performer, with failures dropping just over 34 per cent on last year from 313 to 206.

Nic Beishon, head of Equifax Commercial Information Solutions, said: "Our latest report appears to reflect the very close control businesses have been putting on cashflow and costs.

"Cuts in headcount and pay freezes have been key features of the last 12 to 18 months and these strategies certainly appear to be paying off in terms of slowing down the number of businesses going under.

"But we are not yet out of the woods – the actual number of businesses that have failed in the second quarter is not quite back to the levels of early 2008 – although in some cases they are pretty close."

He added: "Clearly we are now comparing performance with the worst part of the recession last year. So it is not surprising to see a significant improvement. But what I think is more useful is to compare this year’s figures with failures in the second quarter of 2008. "

Beishon explained that overall, 6,409 businesses went bust in the second quarter of 2008 – there were 7,175 failures in the second quarter of 2010.

He added: "That’s still an increase but certainly a much smaller jump than in 2009 when failures in the second quarter hit 8,874."