Loss of market share is main risk to firms

THE MOST detailed survey yet conducted into why UK companies go bust has found most collapses are caused by a loss of market share, and that small companies are far harder to rescue than larger ones.

The report by the Society of Practitioners of Insolvency covered 1,900 company failures. Loss of market share accounted for about half of all company failures. In 47 per cent of cases it was the primary cause, and a key contributory factor in 63 per cent.

The chances of saving jobs varied widely, depending on the size of the firm. Workers in businesses that employ more than 200 people have almost a 50 per cent chance of keeping their jobs if their company fails. Those in companies with 14 or fewer have a 7.5 per cent chance of keeping their jobs.

Only 13 per cent of business casualties with turnovers of less than pounds 1m were sold off in something like their original form, while 64 per cent of those with turnovers over pounds 15m were sold on by the receivers.

Mark Homan, president of SPI, said larger companies could afford to call on outside assistance, were more likely to have operations worth preserving, and found it easier to switch to new products than small companies.

Mr Homan said insolvency practitioners had done their job well during a recession in which most business casualties simply lost their markets. More than 72 per cent of all business casualties did nothing to avert failure when they knew they were facing problems.