Continuing downward trend in enterprise failures?

Equifax has released its analysis of Business Failures for the first months of 2011 which upon scrutiny seem to suggest a continuing downward trend in enterprise failures.

For January-February of 2011 a 7.9% drop in failures was evidence compared to the same period in 2010 which could provide some positive signs for business leaders and government.

The latest figures come hard on the heels of the latest data released by the Office for National Statistics (ONS) which in turn showed that total industrial production rose by 4.4% in January year-on-year, while manufacturing output rose by 6.8% over the same period. It must be said however, that whilst output increases, the level of new manufacturing orders fell, perhaps indicating the storm is not quite over.

Key Numbers from the Equifax report indicted:

*A 7.9% fall in failures overall in January-February 2011 compared to same period in 2010.

*That Yorkshire & Humberside saw the biggest regional fall in business failures at 22.8%
* In stark contrast Wales recorded the highest regional increase in business failures of 23.9%
*That despite low sector confidence the Construction sector saw the biggest drop in year on year failures at 20.3%
*And that the Hotel & Catering sector saw biggest year on year increases at 14.6%

Equifax commented that “We saw a steady drop in the number of organisations failing throughout 2010 – and these latest figures are continuing that trend. We believe that good business management has paid off for many organisations. In particular pay freezes and tight control on invoice payments provided the essential focus on cost control and cash flow management to aid survival.”

Despite the seemingly good news from Equifax that more firms have come through the last 12 months with lower cash flow problems, and better credit control management, there could however be a ticking time bomb for the UK economy in the form of HMRC’s tax bill delay scheme.

HMRC’s tax bill delay scheme ticking time bomb?

The government initiative which allows businesses to delay payment of tax could be hiding massive debts which could threaten the future of many companies. According to a number of business turnaround specialists, three out of every four current business turnaround cases cite HM Revenue and Customs (HMRC) as the largest single creditor at the point the company enters administration.

Whilst this is nothing new in itself, for years HMRC has often been the largest single creditor for many firms, the current scheme of delaying the inevitable payments to HMRC as been criticised of fuelling the fire of failure. With HMRC employing private debt recovery firms and debt collection agent’s as a change in tactics, to get tougher on late and non payers, it seems that the continued fall in business failures may well hit a snag as HMRC seeks to reign in the monies it is owed.

For more details on how Factoring Finance can help you avoid late payment problems, cash flow difficulties, and improve your debtors book with Factoring, Invoice Finance, Invoice Discounting or other Commercial Finance , simply get in touch and we’ll do the rest.

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