Business failures drop for first time in two years

Experian's Insolvency Index reveals 18 per cent year-on-year improvement in business failures

The rate of business failures fell in 2010 for the first time in two years, according to Experian's latest Insolvency Index.

The credit expert's figures revealed an 18 per cent year-on-year drop in the number of firms declared insolvent between 2009 and 2010.

In total, 19,946 companies hit the wall in 2010, which is down 4,263 on the year before.

This equates to a business failure rate of 1.04 per cent, compared with 1.25 per cent in 2009, and marks the first annual drop in two years.

According to the figures, business failures peaked in March (with 0.11 per cent of firms succumbing to insolvency) and gradually improved until August when figures hit an annual low of 0.07 per cent.

Max Firth, managing director of Experian, said the turnaround in business failures had been much quicker than in previous recessions.

He explained: "This contrasts significantly to the last major recession of the early 1990s when the rate escalated over a long period and peaked even as the country came out of recession."

Further findings from the index revealed that businesses based in the South fared better in 2010 than those in the North.

Yorkshire had the highest business failure rate at 1.48 per cent.

Scotland had the lowest business failure rate (0.85 per cent), followed by the South West (0.89 per cent) and South East in joint second.

In terms of sectors, the rate of business failures within the plastics and rubber industries was the highest overall at 2.33 per cent, while the IT sector fared considerably better with 0.66 per cent.