Tech sector has high number of firms at risk

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Digital businesses are among those with the highest risk of failure, according to figures produced by the insolvency trade body R3.

The figures show that 32 per cent of technology and IT businesses in the North West – 4,216 companies – have a higher than normal risk of failing within the next 12 months, the highest proportion of any of the main industry sectors.

By comparison, amongst pubs and restaurants which are traditionally regarded as distressed industries, 28 per cent of businesses have a higher than normal risk of failure while in transport and haulage, the proportion is 23 per cent.

The figures are compiled using Bureau van Dijk’s Fame Database.

Paul Barber, deputy chair of R3 in the North West, said: “We are seeing many exciting developments in the digital arena and it is an area with potential to boost economic growth. While we may not be heading for another tech bubble, we need to recognise that many digital businesses are vulnerable. If we are to develop a strong digital sector, we need to identify the challenges they face and find ways to overcome them.”

Charles MacMillan, an insolvency partner with Beever & Struthers, said many tech entrepreneurs were over-optimistic and failed to factor in the full costs of development or assess the competition.

He urged start-ups to have a proper business plan and to protect their intellectual property within a separate company structure.