The retail sector has been hit hard by the credit crunch with massive increases in businesses going bust, according to leading business information provider, Equifax’s Business Failures Report for 2008.

The figures reinforce the British Chamber of Commerce report suggestion that the downturn has taken real hold in the UK economy with little sign of any uplift so far.

The Retail sector was badly affected, with a 23.9 per increase in failures for the whole of the year. And, as all the headlines in the last month have proved, the last quarter of 2008 was very difficult for the sector with a 42.5 per cent increase in failures compared to the same period in 2007.

The overall increase in business failures for the whole of 2008 compared to 2007 is a staggering 18.2 per cent.

Equifax External Affairs director, Neil Munroe, said: “To see the number of businesses going bust for the whole of the year rise so significantly is very worrying. But what is equally worrying is the increases in failures in the last quarter of the year. Comparing Quarter 4 2007 with Quarter 4 2008, there is an increase of 32.1 per cent in businesses going into administration.

“And further evidence is provided of how the downturn has impacted on businesses through the year when we compare Quarter 4 2008 with Quarter 3 2008, with a 24.2 per cent increase in failures.

“These figures reinforce what every economic commentator is saying - that we are not yet at the turning point of the recession, with the numbers of businesses going to the wall highly likely to continue to increase in 2009.

“It is, therefore, very clear that the efforts from government, such as the loan guarantee scheme announced today and the initiatives by banks such as fixing fees and releasing more credit, will be absolutely crucial, especially for smaller businesses struggling with cashflow management.”

Regionally only Scotland saw a drop in failures year-on-year - albeit of just 0.9 per cent. The North East saw the biggest rise in failures year on year at 41.2 per cent and this was even worse for the fourth quarter of the year with a year on year increase of 57.8 per cent. Other Northern regions also struggled through the year with a 29.1 per cent year on year increase in businesses failing in the North West and a 23.9 per cent increase in Yorkshire & Humberside.

“It is clear that stimulus is needed from Government and the banks to inject funds into business lending to stem this flow of failures in 2009,” said Munroe.

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