IT insolvencies rise, but overall business failure rate plateaus

Latest Experian figures reveal insolvencies in IT industry went up in April compared to same time last year, but overall insolvency rate remained stable

The business failure rate across the UK has remained at the same level for an entire quarter, the first time this has happened since 2007, according to market watcher Experian.

The firm’s latest figures for April show the business insolvency rate staying at the relatively low level of 0.08 per cent for a whole quarter – which Experian attributes to a more stable trading environment and increased resilience to business failure.

But despite the overall positive news, the number of firms going bust increased in the IT sector, with the figure rising from 68 in April 2012 to 84 in April 2013.

Looking at company size, businesses at both ends of the scale experienced low insolvency rates in April. Firms with one to two employees remained low at 0.06 per cent – the same rate seen in March this year and April 2012.

In addition, the UK’s largest companies (with 501 or more employees) saw a below-average insolvency rate of 0.06 per cent, falling from 0.12 per cent last month and the 0.08 per cent recorded in April 2012.

Mid-market-sized firms also saw an improvement, according to Experian, with firms with between 26 and 50 employees seeing their insolvency rate fall from 0.16 per cent in April 2012 to 0.14 per cent in April 2013.

Finally, firms with between 11 and 25 employees also saw improvements, with the rate dropping from 0.17 per cent in April last year to 0.16 per cent in April this year.

Max Firth, managing director of Experian Business Information Services UK&I, said: “We have seen that the insolvency rate has been decreasing for some time, but the fact that it is staying low is encouraging news. It is particularly pleasing to see that companies at both ends of the supply chain are improving all the time.

“Small companies make up the lifeblood of the British economy, so it is good to see that they have relatively low insolvency rates. And at the larger end of the scale, the big firms have a significant effect on the whole supply chain, so to see fewer failures is promising and will no doubt boost confidence in both customers and suppliers.”

In terms of regions, Scotland saw the lowest level of businesses going bust, closely followed by the North East. Unsurprisingly, London saw the highest number of firms going bust in April, closely followed by the South East.