• Immediate Working Capital
  • Growth, Aquisitions, MBOs
  • No Need for Re-negotiation
  • Instant Cash Flow
  • Saves Management Time
  • Improved Collections Performance
  • Recession-Proof Thinking
  • Practical How To Guides
  • Business Knowledge Bank
  • Fast Track Response
  • Competitive Rates
  • Personal Service
Proportionally Fewer Firms are Failing
Date Added: Wed May 20 2009
Analysis in Experian’s Quarterly Insolvency Report and Distress Index from data specialists, pH, one of its companies, reveals that — proportionally — significantly fewer firms are failing so far compared to the last recession, because of the increase in the size of the UK business population in recent years.

As a result, since the first quarter (Q1) of 1992 (when the insolvency rate was 0.82%) the real rate of insolvencies actually declined until 2006. It has only risen slightly since then to stand at 0.32% per quarter in Q1 2009, with 6495 failures in a total business population of 2.05 million registered businesses.

Rolf Hickmann, Managing Director of pH, comments: "Our analysis shows that the business to business population is still fairly resilient on the whole and has not yet suffered significant insolvency rates from the credit crunch, despite the fallout in the financial sector. Small firms in particular are showing themselves to be resilient, while mid-sized businesses appear to be bearing the brunt of the downturn. Whether we are now at the start of an upward trend, as seen in the third quarter of 1990, or whether the insolvency rate will flatten still remains to be seen. The net effect of a lower birth rate and higher death rates means that the total business base is growing more slowly, but it is still growing."

Analysing insolvencies by key industry sector highlights significant differences in insolvency rates.

* As at the end of Q1 2009, the Construction sector was experiencing the highest insolvency levels at 0.24 %. Around 400 firms in the construction sector, out of a total of nearly 163,000 construction businesses, failed in March 2009.
* The Manufacturing sector has seen a higher than average insolvency rate throughout 2008 and this has continued into 2009 with a current insolvency rate of 0.23 % of all manufacturing businesses failing.
* Meanwhile, despite high profile retail insolvencies, there were 425 retail business failures recorded in March, representing just 0.21% of all retail businesses. Although this figure has grown month-on-month, it has been offset by a rise in the creation of new retail businesses. There were 199,000 retailers operating in March compared with 195,000 in January 2009.
* The finance sector has seen an erratic insolvency rate over the past 15 months. From a low of 0.07% in June 2008, the rate peaked at 0.21% in December 2008. In March 2009, 93 finance insolvencies were recorded, 0.15% of all finance businesses.