Business Insolvency Index – Large companies buck quarter of falling failures

Experian’s latest monthly Business Insolvency index shows that, overall, the level of business insolvency in the UK continues to decline.

0.08% of UK businesses went under in July, down from 0.09% in July 2012. This was the third consecutive month that the rate was lower than the corresponding months last year, the first time this has happened since 2010.

Although the rate is marginally higher than in June 2013 (when 0.07% of businesses failed), this is still positive news for the economy. The longer term trend shows a steady and continuing decrease in insolvency rates.

The insolvency rate either dropped or remained stable in nine out of the 11 UK regions. Scotland, Yorkshire and the West Midlands showed the biggest yearly improvements.

The bad news is that levels of insolvency amongst large companies, where a single failure can have a catastrophic impact, are on the rise.

13 businesses employing more than 500 people became insolvent in July. This represents 0.13% of the large business population. In July 2012 just seven large companies (0.07%) went under.

A whole quarter of dropping insolvency rates is really positive news, but the fact that big companies have seen quite a rise shows that we are not out of the woods yet. Just one large failure can affect the significant number of firms that will form their supply chain.

All businesses need to remain vigilant and ensure they have monitoring systems in place, however simple, to ensure they better understand the financial status of their customers and suppliers, and are able to act quickly if one of them gets into difficulty.