Experian today revealed that the number of automotive companies going bust rose by 30. 9 per cent during the second quarter of 2008, compared to the same period in 2007.
Despite a positive start to the year, 72 automotive businesses failed during April, May and June, representing the biggest increase in Q2 automotive failures since 2001.
The total number of insolvencies within the automotive industry for the first half of the year now stands at 134 – an increase of 10. 7 per cent on last year.
Of the 34 industries analysed by Experian, the automotive industry had the 10th highest increase in insolvencies in quarter two. Overall during this quarter, the total number of businesses in all sectors going bust rose by 19. 7 per cent.
Kirk Fletcher, Managing Director of Experian’s Automotive division, said, “everyone knew 2008 was going to be a tough year. However, when the year began positively – with quarter one seeing a six per cent drop in insolvencies and both new and used car sales remaining fairly stable – there was hope the industry may manage to ride out the credit crunch for a few more months.
These latest figures reveal a worrying nose dive. Conditions are tough and with fears of a recession on its way, most companies are now monitoring the profiles of the businesses they are dealing with and dealers may find that they are under more scrutiny than before. Even those who are managing to keep their heads above water need to keep an eye on their financial and commercial profile.
Fletcher also said that in the automotive industry, stock value is high and traditional lines of credit are vital. Whilst generating sales is important, maintaining a good business credit score and a low risk profile will be the factors that help dealers retain their business relationships and lines of credit.
Conflicting reports
In what appears to be contradictory information coming into SME Web. Equifax, Experian’s competitor, reported in their Quarter 2 analysis of the UK economy that the transport and communications sector saw a drop in business failures year on year by 9. 3%.
While it can be said that the two reports have different parameters of analysis – the difference in figures are large. Unfortunately neither reports reveal the details of which companies are being analysed. More importantly we are unsure of the nature of the business they conduct.
Gary Howes is Online Editor of Director of Finance Online.
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