A HIGH street spending slowdown contributed to a second consecutive quarterly rise in business failures in the first three months of 2005, according to research.

Lower consumer confidence and spending helped boost company failures to 4,168 in the first quarter, compared with 4,092 in the same quarter last year, credit checking group Experian said.

Corporate failures rose by 0.2 per cent in the fourth quarter of 2004 and the rate accelerated in the first quarter of this year to 1.9 per cent.

Voluntary liquidations increased by two per cent over the same period - the first time they have risen in more than two years.

The latest insolvency figures reflected current market conditions some of the threats that businesses experience.

In particular, lower consumer confidence and spending had hit the retail industry hard.

Declines in sales of household goods and business by catalogue and internet retailers caused retail sales volumes in March to fall by 0.1 per cent against revised growth of 0.3 per cent in February, official figures showed last week.

Non-food retailing had seen a year-on-year increase in business failures of nearly 30% and food retailers had fared even worse, with an increase of 53%, Experian said.

The recent scare sparked by the illegal use in food of the Sudan 1 dye and increasing competition from major companies in the convenience sector may have played their part in the difficulties faced by retailers, Experian said.

Retailing was among 15 of the 34 industries surveyed by Experian that showed an increase in business failures in the first quarter.

Sharp increases were also recorded in the servicing and repair sector, agriculture, forestry and fishing, hiring and leasing and building and construction.

Business failures declined in 14 industries, including motor traders, printing, paper and packaging, post and telecoms, leisure and hotels and information technology.

By region, Yorkshire and Humberside had the highest increase in business failures at 13% to 399, while the South East (7% up at 915), the West Midlands (9% up at 372) and Scotland (3% up at 180) also recorded increases.

Northern Ireland showed the biggest fall in failures, down 48% against the same period last year.

Experian said administration orders had risen by 51% while compulsory liquidations, receiverships and voluntary arrangements fell by 1%, 47% and 8% respectively.

Phil Cotter, managing director of Experian'ss business information division, warned firms to carry out regular credit checks on new and existing customers to reduce their exposure to failures and bad debt.

"As more companies go under, their suppliers are left with bad debts, which will in some cases tip the supplier over the edge," he said.

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