Business failures on the rise in first half of year
Northern Ireland business failures for the first six months of 2010 increased by 23% compared to the same period last year, it has emerged.
The figures are in stark contrast to the rest of the UK, where all other regions have seen their insolvency rates decline for the same period.
And leading credit insurer Euler Hermes has warned the situation in Northern Ireland may deteriorate further as potential Government spending cuts threaten the fragile economy.
According to its August issue of Quarterly Risk Bulletin, Belfast saw an increase in business failures from Q1 to Q2 — up by 31% to 0.39% for the second quarter — placing it in the top 10 towns and cities for the highest insolvency rates in the UK.
Andy Hodson, regional risk manager at Euler Hermes UK, believes Northern Ireland will not escape the inevitable round of Government spending cuts.
He said: “Frontline services are expected to be saved but it is not yet clear exactly where the cuts will eventually fall.
“However, the Government has indicated the need for a larger private sector in Northern Ireland to combat the significant reliance on the state.”
Euler Hermes confirmed the spending cuts are further bad news for the region, which is already under pressure from existing economic pressures, clearly evidenced in some sectors like construction.
Matt Cupitt, risk analyst for Euler Hermes explained: “Based on recent anecdotal evidence, construction companies are already anticipating reduced work volumes and cost-cutting going forward.
“We expect to see greater pressure on the local construction market which will intensify as the significant curbs on spending become clearer.”
Euler Hermes UK’s Quarterly Risk Bulletin looks at general, regional and sector insolvency trends in the UK and the Republic.
It focuses on the trends of Q2 2010 v Q1 2010 with a special feature on the geographical impact of the Government spending cuts and a construction sector focus.