Business failure up as credit crunch bites

Quarter one of 2008 has seen the first increase in business failures for 12 months, according to the latest figures released by Experian. Some might see this as the first clear indication that the credit crunch is beginning to make life tough for small businesses.

Experian data reveal 4,798 businesses failed during the first quarter of 2008, up 8.5% on the previous ear.  It’s also the second highest single quarter jump in failure rate since Experian started recording figures in 1997.

Tony Pullen, managing director of Experian’s business information division, clearly believes this may be the thin edge of an increasingly precarious economic wedge.  He comments:

These figures are hugely significant, highlighting the impact the continued credit crunch is having on businesses across the UK.  It’s the first overall increase in failures that we’ve seen for 12 months and demonstrates the nervousness there is in the economy.

The banking/financial services and property sectors appear to be taking the brunt of the pain, unsurprisingly. But failures in agriculture (up 109%), food retailing (up 35.9%) and textiles and clothing (up 29.8%) sectors are also of concern.

By far and away the most affected areas of the UK are Northern Ireland which saw Q1 business failure rates rise by 51.9% and the East Midlands which saw a 53.6% increase.

Whether or not these latest figures represent a trend or a blip, it’s likely that most businesses will be looking to exercise caution when it comes to assessing their risk exposure to certain types of customers.