SMEs lead the fall in business insolvencies

The latest Business Insolvency Index from Experian revealed that during June 2012, 0.08 percent of the business population failed – a small improvement from the 0.09 per cent recorded in both the previous month (May) and also in June 2011. Some 1,650 businesses became insolvent in June 2012, compared to 1,841 in May 2012 and 1,783 in June 2011.

SMEs with one to 100 employees were the only group to see improvements in company insolvency rates, with the biggest drop coming specifically from SMEs with 51 to 100 employees – from 0.19 per cent in June 2011 to 0.12 per cent in June this year.

The UK’s biggest businesses (101 or more employees) experienced an increase in the rate of insolvencies compared to June 2011. Firms with between 101 to 500 employees experienced a 0.16 per cent failure rate, compared to 0.08 per cent in June last year. Firms with more than 500 employees saw an increase in insolvency rate from 0.12 per cent in June last year to 0.15 per cent in June this year.

Max Firth, Managing Director of Experian Business Information Services, UK&I, says that although the overall figures for June show a fairly stable environment at the moment led by smaller firms, the higher insolvency rate at the top end of the business world will have an impact on the supply chain: “Many smaller suppliers, unless they have a good credit management process in place, will find themselves short of a major customer and left with unpaid bills. They will need to move quickly to fill the gap in their customer base.”

Overall, Scottish firms fared the best during June. In addition to improved insolvency rates, they saw the highest improvements in financial health from June 2011 (82.68) and also from May 2012 (83.44) to 83.45 in June 2012.

The only regions to experience an increase in the rate of business insolvencies during June, month on month and year on year, were Yorkshire and the West Midlands.

Of the UK’s five biggest industries, the leisure/hotel and the building/construction sectors saw the biggest improvements – from May 2012 and also compared to June 2011. For firms in the leisure/hotel sector this is the third consecutive month of falling insolvencies.