nline shopping and aggressive supermarket pricing factors behind the UK High Street topping the charts for business failures according to 2006 Equifax Business Failures Report
The UK High Street was the biggest sufferer of business failures across 2006, despite the sudden rush of pre-Christmas spending in December, according to Equifax, in its 2006 Business Failures Report.
The underlying picture painted by the Report suggests that, despite the hype of increased retail spending, many shoppers were in fact being 'more picky' about where they choose to buy, particularly demonstrated by the rise in online spending. As well as the more savvy choosing to pick up bargains online, they were also being enticed by the offers from the more aggressive supermarkets, which could be squeezing out the independents and smaller retailers.
The increase in business failures across the Retail sector for January to December 2006 was up 17.2% compared to the same period in 2005, painting a gloomy picture for the year. This was only slightly improved by the news that the final quarter of 2006 showed a better year end with a lower increase in failures of just 11.6% year on year.
“Early reports of December activity in the Retail sector suggest that things picked up at the end of the year”, confirmed Neil Munroe, External Affairs Director, Equifax. “But these overall figures show the picture across the year – and will certainly reflect the fact that smaller, independent retailers are bearing the brunt of changing consumer attitudes.
“It's more important than ever for these sorts of businesses to ensure they are protecting themselves in every aspect of their business activity, including doing basic credit checks on new suppliers and customers.”
According to the Equifax Report other market sectors fared better. For the Wholesale sector, failures over the year only rose by 4.9% compared with 2005, although even here the final quarter was ominous with failures up by 6.6%. And the Transport & Communications sector saw a year on year increase of 4%. The Construction sector also performed better than other areas of UK business, with failures increasing by only 1.1% compared to 2005.
A brighter picture was also seen in the Services sector where a drop of 7.7% in the number of failures compared with 2005 maybe related to the longer term contracts that this sector experiences. Similarly it appeared that the Manufacturing sector continued to expand across 2006 with a drop in failures overall of just over 2% on the year compared with 2005. However a warning note is sounded by the 2006 Quarter 4 figures where business failures increased 11.3% year on year. So de-celeration or consolidation maybe on the cards for the start of 2007.
In the light of these figures Equifax urges businesses of all sizes to protect themselves by putting in place risk management procedures including basic credit checks. Many of the year end figures indicate that it is still the smaller businesses that remain particularly vulnerable. “Small businesses are more vulnerable to the impact of bad debt and fraud yet many of these types of organisations fail to take even the basic steps to protect themselves” concluded Neil Munroe.
“The small to medium business can benefit from the latest online tools that allows them to check on the customer's or prospect's current credit worthiness instantly so that they know exactly who they are doing business with.”