The new data on business failures brings into question other market indicators on the UK economy. The latest Equifax Business Failures Report, which looks at reported liquidations and petitions for liquidation shows that in several key sectors, business failures have increased year on year. And significantly, the level of business failures has increased in the first half of 2005, compared to the latter part of 2004.
“There has been much debate recently about whether the UK economy is steady or, in fact, is in a slow decline,” reported Nick Frazer, head of business information services of Equifax. “But the Equifax Business Failures Report indicates that there has indeed been a steady increase in the level of business failures in a number of key sectors. These include the general retail sector, the transport and communications industry and the construction industry.
“Interestingly, however, the motor retail sector – which has seen a general decline in new car sales over the last few months has actually seen a very small reduction in the number of business failures for the first half of this year, compared to the last half of last year. This must be, albeit in a small way, encouraging for this sector.
“Although the motor retail figures are more positive, what our data appears to suggest is that consumer confidence has been in a lull through 2004 and into 2005 and, in fact, the General Election in May did nothing to boost economic confidence generally” concluded Nick Frazer. “It will be interesting to see what the June Business Failure Report looks like (released later this month) and whether, post election, there are any early signs of renewed confidence.”
The Equifax findings also highlight the importance of credit checking organisations before embarking on new contracts or relationships. Over 80 per cent of the businesses that went into liquidation or were petitioned for liquidation in the first half of 2005, were given a zero credit rating by Equifax three months prior to failure. Equifax Business Credit Ratings are calculated using a comprehensive range of information, including fraud data and blend of commercial and consumer information unique to Equifax, which, in combination is highly predictive of business failure.
