The number of company failures fell by over nine per cent during 2003, fuelling hopes that the UK economy has recovered from its recent slump.
According to new data released by business solutions firm Experian, 17,522 companies went bust last year, down 1,825 on 2002’s figure.
The fourth quarter of last year saw the biggest fall in insolvencies, with the number of business failures down 17 per cent on the corresponding period in 2002.
Although there will still be concern at the relatively high numbers of startups that quickly fold, the fall in business failures supports many analysts’ view that 2004 will be an ideal year to set up an enterprise thanks to low inflation, static interest rates and the improving economic picture.
Experian’s research found that just eight of the 34 industries polled reported an increase in failures during the last three months of last year, with firms dealing in plastics, rubber and electricals suffering most.
However, 25 sectors reported a drop in insolvencies, with builders, technology firms and printing companies having the best survival rates in 2003.
Over the past 12 months, only the North East and Northern Ireland experienced a rise in business failures, with London, the South East and the South West recording the greatest drop in insolvencies from 2002.
However, as reported by Startups.co.uk on Tuesday, business advisers BDO Stoy Hayward predicted that there will be a large rise in failures amongst retailers in 2004 as consumers decide to curb their spending to avoid large debts.
Phil Cotter, of Experian, explained that the introduction of new insolvency rules in 2003 has made it easier for businesses to get out of financial trouble.
“Under the new rules, banks are no longer able to appoint a receiver, they can only appoint an administrator and it is now easier for companies to put themselves into administration to gain breathing space from their creditors and put measures in place to prevent corporate failure.
“Yet, despite the increasing rescue culture, there is still no excuse for complacency. Last year thousands of companies went to the wall at the rate of 70 per week, resulting in millions of pounds of bad debts, often at the expense of other UK businesses, consumers and UK economy as a whole.
“To help protect themselves from losses when customers go bust, companies are well-advised to find out as much as possible about their existing and prospective customers, their financial status and payment performance,” he said.
