Business insolvency numbers ‘on the wane’

The number of UK companies needing to make use of insolvency services fell in January this year, a new report has revealed.

A study by Experian has revealed that the first month of 2012 saw 0.07 per cent of UK businesses becoming insolvent, compared with 0.11 per cent in December.

The news came at the same time as the Experian Business Insolvency Index showed an improvement in the overall health of businesses, with the reading rising from 83.73 to 84.01.

However, while the report noted that the level of insolvency was comparable with that of a year ago across most sectors of the economy, the rate for firms with more than 501 employees was up from 0.07 per cent to 0.2 per cent.

The largest drop in insolvencies was in Yorkshire, where the rate fell from 0.15 per cent in December to 0.09 per cent in January. The second largest falls came in London 9from 0.1 per cent to 0.05 per cent) and the south-east (from 0.11 per cent to 0.05 per cent).

UK managing director for Experian's business information services division Max Firth said the fall in insolvency rates back to where it was at the start of 2011 is "certainly positive" and suggested that with many companies seeing their "underlying financial strength" gradually increasing, there is room for "cautious optimism" in 2012.

But that is not the whole story, he added, stating: "The latest data has, however, revealed an increase in the rate of insolvencies for the largest firms. This highlights that despite a positive start to 2012, businesses of all sizes still need to understand the risks they are exposed to and have strategies in place to protect themselves."

Overall, small and medium enterprises (SMEs) were less likely to suffer insolvency than larger firms, the report found.

Such a revelation comes despite the fact that official figures revealed the Project Merlin targets for bank lending to SMEs in the year to February 9th 2012 were missed, reaching only £74.9 billion instead of the £76 billion that was supposed to be provided.