ICT Sector Riding out the Credit Crunch – so far…

UK businesses appear to be riding out the credit crunch, and the impact of a tougher borrowing environment has made little impression on corporate failures, according to industry figures released today by Experian, the global information services company. But, while the majority of industry sectors have escaped with a fall in business failures over the final quarter of 2007, Banking and Financial Services and Property are feeling the pinch.

Experian, who separate out the IT and Comms sectors in their analysis, show a 25% drop in corporate failures in the IT sector and a modest 1.9% rise in the comms sector for Q4 2007. Overall, the combined sector is ahead of the game both on Q4 and for 2007 when compared to the previous year for failures.

Commentators have suggested that credit tightening would impact most on fast growing parts of the financial sector and property buyers dependent on cheap credit, and Experian’s figures bear this out. In addition to an increase in failures over the year, both Banking and Financial Services and Property saw an increase in the number of business failures in the final quarter of 2007. Over 130 businesses in the Banking and Financial Services sector failed over the year, an increase of 9.8 per cent, while Q4 2007 saw 42 companies fail, an increase of almost 20 per cent on the same quarter in 2006.

Property saw an 18.7 per cent increase in failures compared to the same quarter 2006 and a 9.7 per cent increase over the year compared to 2006, with 543 failures.

Tony Pullen, Managing Director for Experian’s Business Information division, said: “Given the widespread debate and speculation on the likely negative impact of the credit crunch on businesses, these figures are somewhat surprising. In fact, the credit crunch, more stringent lending terms, higher borrowing costs and general concern about the economy could be encouraging more vigilance and increased caution amongst business managers and owners with regards to cash flow, risk exposure and the customers they choose to deal with.

“Certainly, businesses are increasingly aware of the insight they can gain by accessing powerful business information, such as Risk Reports and Ledger360, in order to gain a picture of the financial health of their customer base, credit check customers, reduce their exposure to bad debt and ensure they are getting the best returns on marketing investment.”

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