Equifax Business Failures Report 2006 says the start of 2006 saw the UK construction sector experiencing a rise in business failures of eight per cent compared to the same period in 2005. However, the survey now reveals that the year ended on a better note with just a 1.1 per cent increase in failures for the sector.

The construction sector even benefited from a steady performance in the last quarter of 2006 with business failures increasing by just two per cent over the same period last year. However, these improved figures should not lead to complacency urges Neil Munroe, External Affairs Director of credit information specialist Equifax: “Companies of all sizes should protect themselves by implementing risk management procedures including basic credit checks.

“Many small businesses in the construction industry in particular are more vulnerable to the impact of bad debt and fraud yet many fail to take even the most basic steps to protect themselves. Even the very small businesses can benefit from the latest online tools allowing them to check a customer or prospect’s current credit worthiness instantly so that they know exactly who they are doing business with.”

Other sectors
Also in good shape across 2006 was the service sector with 7.7 per cent fewer business failures than in 2005 according to the report. And the last quarter of 2006 suggests that this positive trend could continue in 2007, with a four per cent reduction in failures year on year.

Other areas of UK business and industry also came out of 2006 with creditable performances. The manufacturing sector showed improvement across the year with an overall drop in business failures of just over two per cent on the year compared with 2005. But a note of caution was sounded by Quarter 4 figures where business failures jumped to 11.3 per cent year on year.

The wholesale sector failures over the year only rose by 4.9 per cent compared with 2005. However, even here the final quarter was ominous with failures up by 6.6 per cent. The transport and communications sector fared better with an increase in failures of just four per cent.

Online spending
However, things weren’t so positive in the retail sector. Seasonal trading patterns may well have been the underlying cause of a much poorer performance on the UK High Street where a tougher story was told. The retail sector recorded the highest level of business failures across 2006. The underlying picture painted by the Business Failures Report suggests that despite the hype of increased retail spending many shoppers were in fact being “more picky” about where they buy demonstrated by the rise in online spending.

The increase in business failures across the Retail sector for January to December 2006 was up 17.2 per cent compared to the same period in 2005. The story was only slightly improved by the news that the final quarter of 2006 showed a better year end with a lower increase in failures of just 11 per cent, year on year.

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Susie Hughes
The Editor © Hardhatter 2007