Medium-sized firms increase resilience

Max FirthBusiness leaders, economic watchers and – indeed – anyone with an interest in our nation’s finances will have found some relief in recent GDP data indicating that the UK had avoided falling into another recession.

And while it would take an extreme optimist to suggest that the UK’s economic performance comes close to matching the Bank Holiday weekend weather, data revealed in Experian’s latest Business Insolvency Index does at least point to an increasingly benign trading environment.

Experian’s business data showed that 1,736 British businesses (0.08% of the active population) went out of business in March. This was a significant improvement on same period in 2012, when 2,112 firms failed.

March wasn’t an isolated month. The overall insolvency rate for the first quarter of 2013 was 0.22%, down from 0.27% in the period January – March 2012

One particularly pleasing sign for me was the falling insolvency rate amongst 25 and 50 people firms. This segment, whose constituents are often too big to be flexible and too small to realise substantial economies of scale, has struggled more than most over recent years.

Indeed, the insolvency rate of 0.17% achieved by this segment in March 2013 was significantly down on the 0.24% recorded in March 2012 and almost that experienced in the miserable month of March 2009, when insolvency rates peaked at 0.35%.

While these figures are more than welcome, the world of commerce continues to pose threats that must be anticipated and managed.

Businesses that are better informed about the risks that might impact them are in a far better position to manage them. Part of the reason that failure rates continue to fall is that businesses of all sizes are becoming much better at anticipating risk and getting their credit policies in shape.