Small firms bear brunt as business failures rise

IT WAS tough going for the region’s businesses last year as more firms went bust.

According to the 2006 Equifax Business Failures Report, it was a gloomy year with the number of firms going under jumping by 9.3 per cent.

There was a dismal end to the year with failures up 19 per cent in the final quarter. This made the South East the UK’s third worst regional performer. Only Scotland (24.2 per cent) and the North East (21.1 per cent) had a poorer record. But they fared better in the final quarter.

By contrast, the number of failed companies in London rose by just one per cent year on year. Even in the final quarter, the increase was just 2.1 per cent.

"We know that a good proportion of these business failures would have been small businesses," said Neil Munroe, external affairs director at Equifax, one of the world’s largest sources of consumer and commercial data.

"It is clearly vital that SMEs take advantage of the tools available to them to reduce the financial risks to their businesses.

"Many small businesses are very reliant on the financial stability of their trading partners as well as creditworthiness of customers and new prospects.

"Carrying out initial credit checks on customers and suppliers is good practice but so to is ongoing monitoring of any changes to their financial status.

"This is an essential process in the risk reduction strategy that any business should be adopting."

Mr Munroe urged 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 vulnerable.

He added: "Small businesses find it hard to withstand the impact of bad debt and fraud yet many fail to take basic steps to protect themselves.

"The lesson is very clear - know who you are doing business with."

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