UK business failures set to soar

Business failures 2001/2002.

The future is far from bright for UK business as figures reveal a rise in company collapses to nearly 33,000 so far this year, fuelling fears of an economic slowdown.

According to D&B (formerly Dun & Bradstreet) the business failure rate has increased by 7.3 per cent in the first nine months of the year compared to the same period last year, reaching the highest rate for three years.

Philip Mellor, senior analyst at D&B, said: “Last quarter we had strong hopes that the rate of business failure in Britain had started to decline.

“I believe it would have done so, but for worries about the continuing slowdown in the UK and other European countries.”

Mellor predicted that the situation could get worse in the next three months, as consumer spending falls amid fears of rising unemployment.

Business failures in London, often a barometer for the rest of the country, increased by 8.3 per cent, including a 25 per cent increase in smaller business bankruptcies.

But insolvency practitioners indicated that they had not seen a noticeable increase in company collapses.

“We’ve been busy for the past three years, but haven’t seen a marked upturn in the last quarter,” explained Jim Tucker, a corporate recovery partner at accountancy firm KPMG.

However, he warned that some sectors were faring worse than others. “Large swathes of manufacturing are suffering from the high exchange rate and a lack of investment,” he said, adding that insolvency practitioners are still seeing a shake-out in the telecoms industries.

This was a view echoed by Jeremy Willmont, a corporate recovery partner at accountants Moore Stephens.

“There has been a creeping up in the number of insolvencies,” he said. “People have been hanging on but, with the number of redundancies coming through, it will feed through to High Street spending.”

Willmont added that manufacturing was “almost grinding to a halt” and predicted that more jobs in the sector would move abroad.

This article first appeared in Accountancy Age magazine.

Related reading

HMRC banknotes