Business failures rose 25% during the June quarter to reach their highest level in 12 months. Smaller businesses and those in the retail, finance and service sectors recorded the highest failure rates, indicating firms in troubled sectors of the economy are struggling to stay afloat during periods of reduced cash flow. D&B notes that failures in construction rose 53% followed by retail at 40%.

D&B said firms employing between 1 and 49 staff members had more than double the number of failures while businesses with 500 or more employees experienced a drop in insolvencies during this time.

According to the latest Dun & Bradstreet Business Failures and Start-ups Analysis, almost 3000 firms failed in the second quarter of 2011.
Preliminary 2011 data indicates the number of insolvencies is increasing year on year. If rates continue at this pace, this number will comfortably surpass the 2010 figure of over 10,000.

The data coincide with Dun & Bradstreet’s downgrades of more than 75,000 firms during the June quarter, making them more likely to experience financial distress.

During the same period, over 41,000 new businesses entered the market – a rise of 16% since the March quarter. However, while this figure grew overall the number of new businesses in the retail and service sectors fell dramatically, indicating the majority of new ventures in these troubled sectors prefer online trade to the uncertainty of bricks-and-mortar trade.

To read the full text of the D&B Business Failures and Start-ups Analysis click here.