In a further sign of the strengthening economy, the number of UK business insolvencies continues to fall. New data from Experian, the global information services company, reveals that the overall business insolvency rate dropped from 0.47% to 0.44% in the first half of 2014.
The biggest turnaround was in the North West region. Between January and June, 0.46% of businesses failed – a dramatic improvement on the 0.56% failure rate recorded in 2013. However, the good news did not stretch north of the border as Scotland recorded a substantial rise in insolvencies – up from 0.18% in the first half of 2013 to 0.28% in the same period this year. A slight rise – from 0.41% to 0.42% – was also recorded in the South East of England but all other regions reported a decline in business failures. Business insolvencies in the capital itself declined by 0.4% – from 0.48% to 0.44% between H1 2013 and H1 2014.
A look at the figures based on company size shows that SMEs as well as larger companies continued to make improvements. Only the smallest companies – those with just 1-2 employees – did not record a drop in insolvencies. In this instance, the figure remained static at 0.32%. The biggest drop was recorded by companies with 100-500 employees. The insolvency rate for this group was down to 0.51% in June this year compared to 0.72% during the same period the previous year. The UK’s biggest companies – those with over 500 employees – showed a similar improvement with insolvencies falling 0.17% from 0.67% to 0.50%.
Max Firth, managing director of Experian Business Information Services, UK&I said of the results:
“The fall in insolvencies is in line with the more positive economic backdrop. Improving business confidence and rising market demand is underpinning a greater willingness among firms to employ more people, which is good news across the UK.
It is particularly interesting that the North West, which has seen general improvement in the economic backdrop in line with the UK as a whole, has seen better than average improvement in the insolvency rate.
Insolvencies among the UK’s smallest firms – one and two man bands – did not worsen, but did not improve either. A key component to surviving as a small business is to keep an eye on the fortunes of their biggest customers and key suppliers. If either of these go out of business then the impact will reach them too.”
The latest analysis from Experian follows similar evidence recorded by the monthly Exaro Insolvency Index, which has shown an overall decline in failed UK businesses since April this year.
While these results will be welcome news for business owners, experts warn against complacency. In particular, companies surviving due to historic low-interest rates will be hard hit when rates rise as expected next year.
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