Good news as business insolvencies fall in 2012

The 2012 Business Insolvency Index from Experian, the global information services company, reveals that during 2012, 0.86 per cent fewer UK businesses failed than the previous year, with 1.04 per cent of the business population failing compared to 1.10 per cent in 2011. The year ended with December seeing 0.08 per cent of businesses fail. This compares to 0.11 per cent in the same month during 2011 and represents the lowest rate seen in December since 2007.

Examining the insolvency figures throughout 2012 highlights an increasingly stable picture amongst businesses; with the insolvency rate remaining broadly flat (between 0.25 and 0.27 per cent) in each quarter throughout the year – which is a slight improvement on 2011, when the range was between 0.26 and 0.29 per cent.

The greatest improvement in the rate of insolvencies was seen by firms with 51-100 employees – their insolvency rate fell from 2.22 per cent in 2011 to 1.83 per cent in 2012. This was followed closely by firms with 26-50 employees whose insolvency rate fell to 2.21 per cent, from 2.59 per cent in 2011 and firms with 11-25 employees, where the insolvency rate dropped from 2.60 per cent in 2011 to 2.35 per cent.

The only significant year-on-year increases in the rate of insolvencies came from the largest firms; all those with over 500 employees, which saw an increase from 1.46 per cent in 2011 to 1.61 per cent in 2012. In addition, micro firms with 1-2 employees also saw a slight increase in insolvencies from 0.71 per cent to 0.73 per cent.

Max Firth, Managing Director, Experian Business Information Services, UK&I said: “Following the slight upturn in 2011, 2012 has seen the business insolvency rate fall and then remain stable throughout the year. In particular, firms that suffered most during the downturn were the ones to see the most significant improvements.

“The rate of insolvencies is significantly lower now than when it was at its peak in 2009 at 1.25 per cent, but there is still a way to go before we reach the pre-recession rate of 2007, which stood at 0.97 per cent.

“This is highlighted by the slight increase in insolvencies amongst larger businesses – which highlights the need for businesses to stay alert to changes which may affect them. Ongoing monitoring of all clients and suppliers regardless of size is essential, as the impact of larger corporate insolvencies can be felt down the supply chain.”