Insolvency Rates Fall for SMEs

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The number of SMEs to become insolvent fell in June compared with June 2011, while insolvencies among larger firms increased year on year.

SMEs with one to 100 employees were the only group to see improvements in insolvency rates, the biggest rise coming specifically from SMEs with 51 to 100 employees – from 0.19% in June 2011 to 0.12% in June this year.

However, among larger firms of 101 employees or more, there was an increase in the rate of insolvencies compared with June 2011. There was a 0.16% failure rate, compared with 0.08 per cent in June last year. Firms with more than 500 employees saw an increase in insolvency rates from 0.12% in June last year to 0.15% in June this year.

Experian’s latest business insolvency index found that during June 2012 0.08% of the business population failed, or 1650 businesses, marking a small improvement from the 0.09% recorded in May and in June 2011. A total of 1650 businesses became insolvent in June 2012, compared with 1841 in May 2012 and 1783 in June 2011.

Six firms failed in the insurance industry, a 50% rise compared with June 2011. Of the UK’s five biggest industries, the leisure/hotel and the building/construction sectors saw the biggest improvements from May 2012 and compared with June 2011.

Max Firth, managing director of Experian Business Information Services UK&I, said:

“Although the overall figures for June show a fairly stable environment at the moment led by smaller firms, the higher insolvency rate at the top end of the business world will have an impact on the supply chain.

“Many smaller suppliers, unless they have a good credit management process in place, will find themselves short of a major customer and left with unpaid bills. They will need to move quickly to fill the gap in their customer base.”

Overall, Scottish firms fared the best during June, seeing improved insolvency rates and the highest improvements in financial health in June compared with May and June 2011.

The only regions to experience an increase in the rate of business insolvencies during June, month on month and year on year, were Yorkshire and the West Midlands.

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