14 January 2009 | Paul Snell
The number of companies going out of business increased substantially in 2008, compared with the previous year, according to research published by business information company Equifax.
The report revealed that the number of company closures rose 18.2 per cent between 2007 and 2008.
Neil Munroe, Equifax external affairs director, said: "To see the number of businesses going bust rise so significantly is very worrying. But what is equally concerning is the increases in failure in the last quarter of the year."
Business failures were up 24.2 per cent in the fourth quarter of 2008, compared to the previous three months. The problem, Munroe added, is a fall in new orders and trouble getting access to credit.
Construction has been hardest hit, posting a 32.4 per cent rise compared with last year. Failures in the retail sector were also up by 23.9 per cent, and in the transport and communications industry by 17 per cent. Firms in the North East of England suffered most, although the number of businesses failing in Scotland fell slightly.
Munroe said the number of businesses going to the wall was likely to increase again this year. And this has emphasised the need for firms to do rigorous credit checks on customers and suppliers.
Today the government has announced plans to lend £20 billion to businesses to ease the credit crisis. Munroe said this would be crucial to stopping the flow of failures. But the CBI said the scale of the problem goes well beyond the government's proposals and many businesses feel they are "living on borrowed time".