Companies in the East Midlands are weathering the downturn far better than those in the west of the region, according to a new analysis of business insolvencies.
Business failures in the East Midlands fell by 1.3 per cent in the third quarter of the year compared with the first three months, information group Equifax said.
In the West Midlands the number of companies going bust rose by 10 per cent over the same period
Despite that, says Equifax, the region is still faring better than some.
Failures in the North East, the worst hit area, rose by nearly a quarter (23.4 per cent) while Wales registered a 14.7 per cent increase.
Equifax said the figures showed that the West Midlands has so far avoided “a major downturn, despite tough conditions”.
“While there is clearly immense pressure on businesses with increased costs all-round, it appears businesses in some regions have been able to take the right precautions to manage cash flow and avoid the risk of bad debt and this is enabling them to stay solvent,” said Neil Munroe at Equifax.
“Indeed, the overall increase across all sectors for Q3 is just 3.2 per cent compared to the beginning of the year, but the 0.5 per cent cut in interest rates earlier in October will be a welcome lifeline for businesses across the UK as the conditions remain tough.”
While the top performers in the Equifax survey are the East Midlands and East England (with a four per cent fall in failures), prospects in Scotland also look positive with just a 0.3 per cent rise when comparing the start of the year with the third quarter. Even though the North East seems to be bearing the brunt of the economic downturn, it is not all bad news for the region.
Comparing Q3 with Q2 yields a rise in failures of only 1.9 per cent. Similarly, Wales witnessed an increase of just 2.9 per cent in the same period.
A breakdown of industrial sectors shows manufacturing is worst hit by the downturn, seeing a 13.8 per cent increase in the number of businesses failing in Q3 compared with Q1. However, the services and wholesale sectors both saw failures drop – by 4.2 per cent and 2.6 per cent respectively – in Q3 compared with the start of the year.
The construction and transport & communications industries continued to struggle in the difficult financial climate with failures up 11.7 per cent and 11.9 per cent.
“Although there are increases in these sectors, the trend through this year is pretty steady”, said Mr Munroe. “And significantly, failures in the retail sector only increased by 2.8 per cent in Q3 compared to Q1.
“Although there are a number of external factors that can hit even the most well prepared business, there are indications that firms in some regions and sectors are taking the right precautions to protect themselves.
“They need to continue to use rigorous credit checks, alongside ongoing monitoring of the financial status of their customers and suppliers. By harnessing the power of the latest risk management solutions, firms can minimise the threat of bad debt and secure the future of their business.”