Business insolvency rate down among mid-sized businesses

Evidence of a stronger economic backdrop for companies has come from the latest Business Insolvency Index from global information services company Experian. The business insolvency rate fell year-on-year to 0.08% in August 2013, from 0.09% in August 2012, marking the 12th month it had either improved or remained stable.

Nine of the eleven UK regions saw a year-on-year drop in their insolvency rate. The North East experienced the biggest fall – from 0.12% in August 2012 to 0.09% in August 2013. Even London, which had seen several months of increased insolvency rates, saw a fall from 0.10% to 0.08% – the first since March 2013.

The South West fared particularly well in August. Its insolvency rate of 0.05% was the lowest of all the regions, and was a drop both year-on-year (0.07% in August 2012) and since last month (0.07% in July 2013). Yorkshire was the only region to suffer a slight year-on-year increase: up from 0.08% in August 2012 to 0.09% in August 2013. Scotland, which has enjoyed historically low insolvency rates for nearly eight months now, saw a rise from the July 2013 rate of 0.03% to 0.06% in August 2013.

Of the UK’s five largest sectors, building and construction again saw a year-on-year fall – from 0.17% in August 2012 to 0.12% in August 2013. This was the tenth month in a row to show a fall compared with the previous year. Outside the top five, the insurance industry did especially well: insolvencies were down from 0.15% in August 2012 to 0.03% in August this year.

Looking at company sizes, the biggest falls were among companies with 51-100 employees, where insolvency rates were down from 0.19% in August 2012 to 0.14% in August 2013. Larger businesses with 501 or more employees were less fortunate: their insolvency rate had increased in July, and in August it rose to 0.17%, from 0.06% in August 2012.

Good omens for growth

“We haven’t seen such a prolonged period of stability and improvement in insolvencies for a while and the figures signal an increasingly robust business population, which bodes well for growth,” said Max Firth, Managing Director, Experian Business Information Services, UK&I. “What is particularly significant is the biggest fall coming from 51-100 employee companies. It follows on from a strong year-on-year drop in July and will give more confidence to these mid-sized businesses which suffered the most during the recession.”

Firth added: “When times are good and businesses are looking to grow, safeguarding the supply chain through business monitoring is integral. Businesses need to ensure that they are alerted to any potential issues quickly so sufficient steps can be taken to reduce any potential impact on their business.”

For advice on supply chain management or for further information about any of the points mentioned above, email me or call me on 020 7099 2621.