Positive news for the UK economy at last, as the overall business insolvency rate (the percentage of business population failing) fell to 0.07 per cent in June from 0.08 per cent in the same month last year.
This is the second consecutive month that the rate has fallen year-on-year: in May, Experian’s Business Insolvency Index shows the rate was down from 0.09 per cent in May 2012 to 0.08 per cent in May 2013.
SMEs, in particular, are seeing an improvement in insolvency numbers.
Companies with 6-10 employees, which saw the biggest fall in May, again saw an improvement in June with their insolvency rate going from 0.17 per cent in June 2012 to 0.13 per cent in June 2013. This fall is matched by companies with 10-25 employees, whose insolvency rate fell from 0.19 per cent to 0.15 per cent.
“This is good news overall,” says Max Firth, MD of Experian Business Information Services. “We’ve already seen several months of low, but level, insolvency rates and the fact they have come down further indicates that firms are operating with more confidence than in recent years.”
But Firth also warned that the insolvency rate could increase again, as companies begin to re-stock and re-hire and cash flow becomes an issue again.
“This makes it all the more important for SMEs to understand who they are supplying, how quickly they pay, and think about what credit options are open to them in advance,” he adds.
On a regional basis, outside of Scotland, the North East and Yorkshire saw the biggest turnaround since last year, with the North East falling from 0.13 per cent in June last year to 0.08 per cent in June 2013, and Yorkshire’s rate decreasing from 0.13 per cent in June 2012 to 0.10 per cent in June 2013.
Only London saw a minor increase in its insolvency rate from 0.07 per cent in June 2012 to 0.08 per cent in June 2013.
Of the UK’s top five biggest industries, the building and construction industry saw yet another year-on-year fall, with its insolvency rate down from 0.17 per cent in June 2012 to 0.12 per cent in June 2013.
Other industries faring well include property (down from 0.07 per cent in June 2012 to 0.05 per cent in June 2013) and the motor trade (down from 0.11 to 0.07 per cent).
The food retail business has also seen a significant drop, from 0.13 per cent in June 2012 to 0.04 per cent in June 2013.