Equifax has released its 2008 Business Failures Report, which shows that the increase in failure rate for the whole of 2008 was a ‘staggering 18.2 per cent’.
However, in the final quarter, the figures were even worse – with nearly a one-third increase in businesses going bust.
This, says the business information provider, proves how quickly the recession has began to affect UK businesses. And there is little sign of an uplift, it says, so far in 2009.
Equifax external affairs director, Neil Munroe, blames the downturn in consumer confidence, combined with continued restrictions on lending to consumers and businesses.
He says the increase in failure rate during the last quarter was particularly worrying. ‘There is an increase of 32.1% in businesses going into administration.’ What’s more, there was a 24.2 per cent failure increase between Q3 and Q4 of 2008.
‘These figures reinforce what every economic commentator is saying – that we are not yet at the turning point of the recession, with the numbers of businesses going to the wall highly likely to continue to increase in 2009.’
He thus welcomed the latest announcement by the Government. ‘The loan guarantee scheme announced today, and the initiatives by banks such as fixing fees and releasing more credit, will be absolutely crucial, especially for smaller businesses struggling with cashflow management.’
Construction was the industry hardest hit. However, the retail sector also suffered badly, with a 23.9 per cent increase in failures for the whole year. There was also a 42.5 per cent Q4 increase in failures.
The transport & communications sector, which is heavily dependent on the construction and retail sectors for its business, saw a 17 per cent increase in failures. Services saw a 13.8 per cent increase.
‘It is clear that stimulus is needed from Government and the banks to inject funds into business lending to stem this flow of failures in 2009,’ said Munroe.
‘It is also crucial that those businesses that are holding their own take the right precautions to protect themselves from some of the risks of these exceptionally tough trading conditions.‘