Insolvency rate falls for businesses in the north east

New figures from Experian, the global information services company, suggest that the rate of business insolvencies steadied in March 2012 with 0.11 per cent of the UK’s business population failing, the same level as recorded in March 2011.

The North East of England, a region that has traditionally been one of the hardest hit for insolvencies, recorded a significant improvement in failure rates, declining from 0.22 per cent of its business population in March 2011 to 0.14 per cent in March 2012. This was the biggest year-on-year improvement of any region.

The health of the business community in the North East – measured using an average of Experian financial strength scores attributed to local businesses – rose from 81.71 in March 2011 to 84.50 in March 2012.  Only businesses in the East Midlands recorded a bigger average improvement in financial strength, from 81.82 in March 2011 to 84.89.

Max Firth, UK Managing Director for Experian’s Business Information Services division, says that March was a positive month for businesses in the North East and an improving financial strength score is encouraging:  “It highlights that even in regions which have experienced some of the highest rates of insolvencies over the past year, there will be potential pockets of opportunities for organisations to extend credit and increase business,” he says.

“However, the North East does still have the second highest insolvency rate in the UK, so it is vital that businesses fully understand the financial risks associated with firms they deal with.  This message is pertinent across the UK, regardless of region or sector.  Where there are risks there are also opportunities.”

Of the UK’s five biggest sectors – business services, building/construction, property, IT and leisure/hotel – the building/construction sector experienced a small drop in its insolvency rate – from 0.20 per cent in March 2011 to 0.19 per cent in March 2012.  Coupled with this, it was the sector to see the biggest improvement to its average financial strength score – from 78.11 in March 2011 to 82.67 March 2012.

The biggest increase in the insolvency rate came from the leisure/hotels sector.  The rate rose from 0.17 per cent in March 2011 to 0.21 per cent in March 2012.  In comparison to all 34 sectors analysed, the leisure/hotels sector held the third highest insolvency rate in March.