By Daniel Hunter
According to the latest Business Insolvency Index from Experian, the global information services company, 1,841 firms (0.09 per cent of the total business population) failed during May — the same rate as in May 2011, and a slight increase from the April 2012 figures.
The increase from April was driven primarily by firms falling into the smaller categories — those up to 25 employees. In particular, firms with 6 to 10 employees saw their rate increase from 0.17 per cent in May 2011 to 0.20 per cent May 2012.
This was the first time that firms in this size-band had experienced the highest rate of insolvencies of all, compared with their larger and smaller counterparts.
The average financial strength score of firms remained stable compared to the previous month (April), at 83.65. This also represents an improvement from May 2011 when the score was 82.92
“By the time a firm grows to 6 to 10 employees, the flexibility it benefited from as a micro business begins to disappear," Max Firth, UK Managing Director for Experian’s Business Information Services division, said.
"Fixed overheads become greater and cash flow starts to cause more serious issues if not carefully monitored. Our data has shown that historically, the highest insolvencies have consistently been experienced by firms that have between 10 and 100 employees. If a good credit management process is not implemented before reaching this size, then a firm may find it significantly harder to keep its head above water as it grows.”
Yorkshire only region to see insolvencies fall
Yorkshire was the only region to see its rate of insolvencies fall — from the highest rate held by any region during May 2011 of 0.13 per cent, down to 0.11 per cent in May 2012.
Four UK areas saw an increase in their insolvency rate from May 2011 to May 2012 — the North East, Scotland, Eastern and the South West. The North East region experienced the highest increase in rate of business insolvencies from 0.09 per cent in May last year to 0.14 per cent in May 2012.
Property sector improves
Of the UK’s five biggest sectors (business services, building/construction, property, IT and leisure/hotels), the property sector saw the biggest drop in its rate of insolvencies — from 0.09 per cent in May 2011 to 0.06 per cent in May 2012.
Meanwhile, the non-food retailing sector saw an increase - 0.16 per cent of firms failed during May this year, compared to 12 per cent in May 2011.
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