Fewer businesses went bust in the third quarter of this year compared to the same period last year, according to a report by Equifax.

Fewer businesses went bust in the third quarter of this year compared to the same period last year, according to a report by Equifax.

It says there was a 13.4pc drop in the number of businesses going bust, compared to the same period in 2009.

Compared to the previous quarter the drop was 7.4pc.

The report said the drop sustained a pattern of year on year falls in business failures for each quarter of 2010. It said the figures were even more encouraging in the East of England with business failures down 15.5pc year-on-year and 13.6pc from quarter two to quarter three.

The best performing region was Scotland, which saw a 33.1pc year-on-year drop.

The West Midlands saw the best quarter to quarter performance, with a 15.7pc drop.

Wholesale saw the best quarter-on-quarter performance (19.4pc) and year-on-year (19.7pc) sector improvement

Overall there were 6,646 for the quarter in the UK, bringing the level of business insolvency closer to that experienced in late 2007 and early 2008 when the credit crunch first took hold of the economy, according to Equifax.

The levels during the boom years from 2004 to 2006 were around 5,500 each quarter, the firm said.

'There is no question that the economy is still fragile, and there is much anticipation about the impact of the Government Spending Review and the VAT increase in January,' said Nic Beishon, head of Equifax commercial information solutions.

'Whilst our latest analysis of the Business Failures data is encouraging and shows that all sorts of organisations are taking steps to tackle late payments and bad debts, there is still a long way to go and businesses need to continue protecting themselves from the tough trading conditions.

'However, businesses across the UK should be buoyed by our latest Business Failures Report and the steady fall in insolvencies in the East of England echoes the trend across the UK.

'Overall, the downward trend in failures has been sustained quarter-on-quarter through the year. In quarter one there was a 0.5pc drop in failures compared to quarter four 2009, followed by a more significant 7pc drop in quarter two. And business performance for quarter three has sustained this pattern with a 7.4pc quarter-on-quarter decline in businesses going bust.'

For quarter three, compared to the second quarter, the wholesale sector showed the greatest decline in failures at 19.4pc. The manufacturing and services sectors also appear to have managed sales, debts and cash flow well in quarter three with 12.5Pc and 11.9pc declines in failures respectively.

The transport and communications sector contradicted the downward trend in all other markets with a 13.6pc increase in failures quarter-on-quarter, although the numbers overall in this sector are quite small and the pattern was certainly not repeated year on year, with a 10/3pc decline.

'Government, businesses and trade organisations right across the country should continue to be encouraged by our latest business failures report', concluded Mr Beishon.

'But as the quarter-on-quarter performance in some regions and sectors shows, they can't afford to take the focus off applying the most stringent credit management processes.

'The importance of monitoring existing customer performance can't be under-estimated because the knock-on effect of one organisations failure can ripple throughout a region or sector very quickly. By operating best practice and harnessing the power of the latest risk management solutions, firms can minimise the threat of bad debt and secure the future of their own business.'