Insolvency rates drop to five-month low

30 September 2011

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30 September 2011 | Adam Leach

The rate at which UK businesses are becoming insolvent has dropped to its lowest rate since February, according to a report.

The Experian Insolvency Index for August, published today, reports that 0.8 per cent of UK businesses became insolvent during the month, down from 0.10 in July and 0.9 in June. However, year-on-year the rate has risen, with August 2010 reporting a rate of 0.7. According to the Experian figures, 1,563 companies became insolvent in August.

Despite the fact that the rate has eased compared with recent months, caution is still urged. Max Firth, managing director, Experian Business Information Services, said: “While insolvency rates in August were the lowest since February 2011, our analysis shows that regional variances continue to underline the importance of closely monitoring the financial health of the suppliers and customers that companies do business with.”

The report also found a significant difference in regional insolvency rates, with North East and West Midlands reporting a rate 0.11, the highest score in the UK.

Earlier this month, the North East Chamber of Commerce (NECC) called on the government to scrap its plan to award National Framework Contracts for construction projects because it would put medium-sized businesses in the region at risk.

Ross Smith, head of policy, NECC, said: “National frameworks are squeezing medium-sized companies from both ends – and yet these are the very companies that the government needs to grow if we are to rebalance the economy and kick-start north east growth.”

The South West region performed the strongest, with a rate of 0.06.

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