Business failures back to pre-credit crunch levels


Business failures back to pre-credit crunch levels

Alex Scroxton

Insolvencies among British businesses have sunk to their lowest level since just before the credit crisis.

The latest edition of Experian's insolvency index shows that business failures dropped to an average of 0.07% in August, the lowest point since June 2007.

The index also revealed tat the average financial strength score for businesses was up from 80.79 this time last year to 81.06 in August 2010, with small businesses faring especially well.

The IT sector fared better than average; just 44 businesses went to the wall in August 2010, down from 57 in August 2009, a failure rate of 0.04%. A total of six telecoms firms went under, down from 24 this time last year.

Many parts of the country experienced a dramatic reversal of fortunes, with a north-south divide that emerged earlier this year apparently reversing itself as the North East went from the region with the highest insolvency rate in the UK to one of the lowest.

Yorkshire and the North West fared less well, with failure rates of 0.13% and 0.10% respectively, while Scotland, the East of England, the South West, London and the South East all saw business failure rates drop to 0.06%. One region, Wales, saw insolvency rates increase slightly.

"It continues to be evident how quickly fortunes can change and the importance of closely moitoring the financial health of the suppliers and customers that businesses of all sizes deal with," said Max Firth, managing principal of Experian's business analysis unit, pH.

"This month's picture is very different to the one we saw back in March this year when all regions, bar one, saw an increase in insolvencies and the rate was almost double at 0.11%," Firth added.

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