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Business failures at lowest rate since September 2008

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The UK business failure rate, which has been seeing an upward trend since 2007, fell to its lowest level in August since September 2008, according to Experian, the information services company.

The figures were revealed today as Experian launched its new monthly Insolvency and Distress Index, a comprehensive real-time view on the extent of UK business failures.

The index revealed 0.09% of UK businesses failed during August this year, a slight increase on the 0.08% recorded in August 2008. However, it was significantly lower than the 0.11% recorded in July, and the lowest rate so far this year.

The total number of business insolvencies during August 2009 increased by 11.3%, compared to August 2008. However, in comparison to July, the total number of insolvencies fell by 23%, and with a total of 1,796 insolvencies in August, this too is the lowest number of monthly failures so far in 2009.

Experian's data also reveals a slight improvement in the financial solidity of the UK business population, as measured by its average distress score. The distress score – which predicts the likelihood of a business failing in the near future, with 100 being the least likely to default and 1 being the most likely – had been on a slow downward trend since March 2008 when it stood at 82.24.

Yet Experian's Insolvency and Distress Index reveals the financial distress levels of businesses decreased recently, as the score improved from 80.69 in July to 80.79 in August 2009 This is the best average score the UK business world has seen in the last 12 months.

 

Rolf Hickman, managing director of pH, an Experian company, said: "This latest data is encouraging. However, it is also important to remember although the total number of insolvencies is close to the total number in the last recession, the insolvency rate is no where near as high. The underlying business population has also been growing at an increasing pace, so this needs to be taken into account in order to gain a realistic picture of insolvencies in the UK and the extent of any impact on the UK economy rather than simply looking at raw insolvency statistics.

"Although it is too early to tell whether this is an indication of a more positive outlook, one thing is for sure: businesses are distinctly aware of the current environment and the need to be cautious in any business dealings. We have seen a significant increase in businesses monitoring the health of suppliers, customers and partners, as well as themselves, in order to ensure they do not suffer from the impact of another business becoming insolvent."

 

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