Insolvency stats show SMEs are weathering storm

Experian figures show smaller companies are showing greater robustness

The upper hand: the failure rate of companies with 51-100 staff fell from 0.24 to 0.13 per cent between April and May

Increased resilience in the SME space saw UK business insolvencies tumble last month.

The Insolvency Index from Experian reveals that a total of 1,491 firms hit the wall in May, an 18 per cent drop on the preceding month. The overall insolvency rate fell from 0.1 to 0.08 per cent.

Having been among the hardest hit by the recession, firms with 51-100 employees showed some of the most impressive improvement. The sector's May failure rate stood at 0.13 per cent, down from 0.24 per cent in April. With the exception of companies with 500-plus staff, all sectors saw insolvencies decrease year on year. However, UK plc's average financial strength score in May was 80.7, down 0.06 points sequentially.

Geographically, the North East displayed the biggest improvement, with the insolvency rate falling from 0.13 to 0.08 per cent between April and May. The IT space remains a solid performer, with 63 firms going bust last month, down from 76 in May 2009. The industry insolvency rate stands below the national average at 0.06 per cent.

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.

“However, 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.”