Corporate Insolvencies Drop Again

The number of company collapses is expected to fall short of predictions for 2010 after the rate of business insolvencies fell again in May.

There were 1,491 in May, 18 per cent lower than in April and 24 per cent below the figure for May 2009, according to Experian, the data company. Company failures in the first five months of this year totalled 8,729 against 10,835 during the same period last year.

However, the economy is bracing itself for more pain according to the widely-held belief that the number of collapses will rise as the UK steers itself through the recession.

Experian said that last month’s performance was due to a vast month-on-month and year-on year improvement among medium sized businesses with 51 to 100 employees. However the biggest increase in insolvencies came from businesses with 501 or more employees with 0.16 per cent of larger businesses collapsing, compared to just 0.6 per cent during the same period a year before.

Rolf Hickmann, managing director of pH, an Experian company, said, “The fall in the number of insolvencies is a good sign and shows that businesses are distinctly aware of the current environment and are taking vital steps to protect themselves from risks.  

“Apart from the very largest businesses, companies of all sizes saw marked improvements in insolvency rates.  However, the greatest improvement came from the medium-sized businesses, which, as we have commented in previous months, have been the hardest hit by the recession.

The leisure and hotel industry and property sector were heavy casualties suffering 123 and 104 insolvencies respectively, however the building and construction sector continued to feel the most pain in May with 230 company collapses, while

The average financial strength score, which predicts the likelihood of a business failing in the next 12 months, of all UK businesses was up year-on-year, from 79.98 during May 2009 to 80.70 in May this year, but it was down slightly on the 80.76 recorded in April 2010.  Although it was only a small decline, this was the third monthly decline in a row in average financial strength score of all UK businesses.  

Hickmann added, “The small deterioration in the overall financial strength score for UK businesses during May highlights the need for businesses to ensure they continue to exercise caution with regards to their risk exposure and those they choose to deal with.”

Posted at 12:25PM Jun 25, 2010 by Marc Stenton in Insolvency  |  Comments[0]