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Business failures creeping up since start of 2011

11 July, 2011

The number of businesses have that failed showed a year-on-year drop of 5.9% in the first quarter of 2011; however, there has been an increase of 1.5% during April and May.

According to the latest Business Failures figures from Equifax, the first five months of 2011 offered some stability to businesses. This is further good news for companies, with the Government reporting at the same time that Project Merlin is on target to improve lending to small businesses.

Equifax 2011 UK Business Failures Report January – May 2011
-15.30% - East Midlands
+3% - East England
+5.20% - London
+25.90% - North East
+4.30% - North West
+18.20% - Scotland
+11.30% - South East
-11.40% - South West
-0.80% - Wales
-11% - West Midlands
+4.50% - Yorkshire & Humberside
TOTAL: +1.50%

The first quarter best performers were in manufacturing and services, showing year-on-year decreases in failures. However, the construction industry showed a year-on-year increase during the same period.

While it is good news that fewer companies are failing, the general financial health of businesses in the UK declined in the six months to April, according to the most recent SME Trends Index.

Neil Munroe, External Affairs Director, Equifax said that at the end of last year, there was a steady drop in the number of businesses failing, which continued into the first few months of 2011. While at the end of February there was a year-on-year decrease of 7.9%. This levelled out slightly for the Quarter as a whole, ending on 5.9%.

This performance overall offers clear encouragement for businesses across the UK. Munroe said that it was clear that we are not out of the woods yet, with some evidence of businesses struggling in the difficult conditions. Failures increased by 1.5% in April/May and while this is disappointing, given the downward trend over the last few months, it's important not to over-react. It is natural to see fluctuations from one month to another when looking at year-on-year figures. This is a small increase, which could easily turn around in the last month of the Quarter.