Businesses have been warned keep a tight control on their finances, after a report revealed business failures rocketed in July.
The report, by credit and business information specialist Equifax, found the number of businesses going into administration rose by almost a third compared to the same time last year.
The transport and communications industry was the hardest hit, with failures rising by almost 60% during the last year, followed closely by the construction industry, where administrations rose by 57%.
Equifax said low consumer confidence and a slowdown in high street spending contributed to a 33% rise in failures in the retail sector, as well as a 26% rise in the wholesale sector.
Nic Beishon, head of commercial solutions at the company, said the price of fuel may also have had a contributing effect to the slowdown.
“With the price of fuel spiralling ever higher many businesses are starting to feel the pinch as overheads continue to soar,” he said.
“The manufacturing sector saw a 39% rise in July 2008 compared to July 2007, which comes as no great shock following recent figures on manufacturing output which decreased by 0.8% in the second quarter of 2008 compared with the first quarter.”
Beishon added that keeping a close eye on customers and suppliers is essential to stave off bad debts.
“There is a temptation not to spend money on checks of new customers and suppliers.
“But the fact is that rigorous credit checks, supported by ongoing monitoring of customers' and suppliers' financial status, are key to help businesses of all sizes protect their cash flow and avoid bad debt,” he said.
© Crimson Business Ltd. 2008
