Business insolvency rate fell in November 2010

23 December 2010

23 December 2010 | Angeline Albert

The number of UK firms going bust fell in November, compared to the same month last year.

The latest insolvency index from global information services firm Experian reveals that the rate of business insolvencies fell to 0.07 per cent last month, down from 0.09 per cent in November 2009.

Despite the drop in business failures, there continues to be a north-south divide in the overall level of insolvencies, with businesses in southern England performing better than those in the north.

The south east, south west, greater London and eastern England were the four regions with the lowest insolvency rates (0.06 per cent), while Yorkshire and the north east experienced the highest rates (0.10 per cent).

The insolvency rate is calculated by comparing the number of businesses that failed with the total business population in the specified area.

Scotland was the only region to experience more business failures this year – going from 0.04 per cent in November 2009, to 0.07 per cent this November.

Businesses with 101 to 500 employees experienced the biggest fall in the insolvency rate, going from 0.016 per cent in November 2009, to 0.11 per cent in November 2010.

Max Firth, managing principal of pH, an Experian company, said: “So far this year, the insolvency rate has enjoyed a period of relative stability. For the past five months, it has drifted between the 0.07 per cent and 0.08 per cent mark, which is a more positive picture than last year.”

Experian’s financial strength score predicts the likelihood of a business failing in the next 12 months, with a score of 100 indicating the least likely to fail, and a score of one the most likely to fail.

The spirits, wine and tobacco industry experienced the biggest increase in financial strength, rising from a score of 82.35 in November 2009, to 83.09 in November 2010.

The financial strength of businesses in the food retailing sector experienced the biggest fall – from a score of 77.66 in November 2009, to 75.78 this year.

The financial strength score of the building and construction sector fell from 78.26 in November 2009, to 77.78 last month.

Firth added: “Regardless of location, all organisations should ensure they understand the financial health of those they do businesses with.”

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