The UK business failure rate, which has been seeing an upward trend since 2007, fell to its lowest level in August since September 2008.
The figures were revealed today by Experian, the global information services company, as it launched its new monthly Insolvency and Distress Index, the most comprehensive real-time view on the extent of UK business failures.
The index revealed that 0.09 per cent of UK businesses failed during August this year, a slight increase on the 0.08 per cent recorded in August 2008. However, it was significantly lower than the 0.11 per cent recorded in July, and the lowest rate so far this year.
The total number of business insolvencies during August 2009 increased by 11.3 per cent, compared to August 2008. However, in comparison to July, the total number of insolvencies fell by 23 per cent, and with a total of 1,796 insolvencies in August, this too is the lowest number of monthly failures so far in 2009.
Experians data also reveals a slight improvement in the financial solidity of the UK business population, as measured by its average distress score. The distress score – which predicts the likelihood of a business failing in the near future, with 100 being the least likely to default and 1 being the most likely – had been on a slow downward trend since March 2008 when it stood at 82.24.
Yet Experians Insolvency and Distress Index reveals that the financial distress levels of businesses decreased recently, as the score improved from 80.69 in July to 80.79 in August 2009 This is the best average score the UK business world has seen in the last 12 months.
This latest data is encouraging, says Rolf Hickman, managing director of pH, an Experian company. However, it is also important to remember that although the total number of insolvencies is close to the total number in the last recession, the insolvency rate is no where near as high. The underlying business population has also been growing at an increasing pace, so this needs to be taken into account in order to gain a realistic picture of insolvencies in the UK and the extent of any impact on the UK economy rather than simply looking at raw insolvency statistics.
Although it is too early to tell whether this is an indication of a more positive outlook, one thing is for sure: businesses are distinctly aware of the current environment and the need to be cautious in any business dealings. We have seen a significant increase in businesses monitoring the health of suppliers, customers and partners, as well as themselves, in order to ensure they do not suffer from the impact of another business becoming insolvent.
D.C.