Business failures fall to lowest level since 1990

Business failures have fallen to their lowest level since before the recession, but the recovery has proved long and painful, according to figures from Dun & Bradstreet.

A survey from the business information group out today shows the number of firms going bust fell 3.7 per cent to 19,962 in the first six months of the year - the first time the figure has dipped below 20,000 since 1990. However, the statistics come with a warning.

Phillip Mellor, Dun & Bradstreet's senior analyst, said that while the figures show that business failures are set on a downward trend, "we still have a long way to go before the business failure toll returns to pre- recessionary levels, when there were less than 30,000 business failures a year."

"The monthly toll of 3,000 plus is still far too high for comfort and companies need to look constantly over their shoulder at the viability of the firms with which they are doing business," Mr Mellor added.

The latest total, which covers company receiverships, liquidations and bankruptcies, compares with a peak of 32,448 hit in the first half of 1993.

Although the trend has been consistently down since then, the number of companies failing still has a long way to match the 13,760 reached in 1990.

A spokesman for Dun & Bradstreet said the fall represented the "wake" from the end of the recession three years ago.

"It has taken quite a long time for the failure rate amongst businesses to reflect the end of the recession. In fact, at the end of the recession, there were still large numbers of companies going bust."

Expectations based on the recession of the early 1980s would have been for failure rates to have been much lower at this stage in the cycle, he said.

By 1986, business collapses were already back to where they were before the slump in the late 1970s. "This time it has taken a lot longer", he added.

There were wide regional differences in the incidence of the latest figures, ranging from a 17 per cent drop in failures to 980 in the East Midlands to a 14 per cent rise to 1,446 in the next-door West Midlands region.

There were also rises in Scotland, up 6.5 per cent to 1,827, and Wales, where the total increased by 5.6 per cent to 752.

Dun & Bradstreet was at a loss to explain the divergent results, pointing out that the West Midlands, for instance, usually does "extremely well" in the company's confidence surveys.

Larger companies did better in the first half of 1997 than small ones, reversing the recent trend, with liquidations of the former down by 8.8 per cent, while bankruptcies - typically affecting small partnerships - were up 0.6 per cent.

Dun & Bradstreet said that paradoxically this was better news for small businesses, as failures of big companies usually meant that their smaller suppliers were dragged down with them.