Signs of the squeeze hurting

The credit crunch filtering through to UK businesses is being blamed for a rise in corporate failures for the first time in more than a year.

While some sectors showed a decrease, overall failures were up 8.5% in the first quarter this year, according to a report from global information services company Experian.

Building and construction saw 54 more firms fail in the first quarter 2008 than in the same period 2007. The total year-to-date of 472 firms going to the wall represents an increase of nearly 13% over 2007.

However, the brunt of business failures was borne by agriculture (up 109%), banking/financial services (up 36%), food retailing (up 36%) and textiles/clothing (up 30%).

In the first quarter of 2008, a total of4798 businesses failed, 374 more than in the first quarter of 2007.

In absolute numbers, the business services sector suffered most, with 1061 companies failing in the first quarter. This was 99 more than in the first quarter last year.

“These figures are hugely significant, highlighting the impact the continued credit crunch is having on businesses across the UK,” said Tony Pullen, managing director of Experian’s Business Information division. “It’s the first overall increase in failures that we’ve seen for 12 months and demonstrates the nervousness there is in the economy.”

He said firms should “exercise caution with regards to their risk exposure and the customers they choose to deal with”.

There was also an increase in the number of sectors experiencing more failures compared to the last quarter of 2007.

Fifteen of the 34 sectors monitored saw an increase in business failures over the quarter compared with Q1 2007. In contrast, over 2007 as a whole, business failures increased in just nine sectors and in 12 sectors in the final quarter of 2007.