Recovery hope as insolvency rate declines

Tim Wallace
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LONDON’S business population got healthier through 2012, according to insolvency figures published yesterday, with the number of firms increasing and the proportion failing coming down.

A total of 5,105 firms in the capital entered insolvency in the year, up 2.28 per cent on the year according to Experian.

But the rate of insolvency fell to 0.98 per cent from 1.03 per cent in 2011, indicating firm creation was faster than business destruction.

Nationally, the total number of insolvencies fell 0.86 per cent to 20,889, bringing the rate down from 1.1 per cent to 1.04 per cent.

London is almost the best performer, with only three regions with lower insolvency rates.

Scotland’s came in at 0.86 per cent, the south west’s at 0.87 per cent and the south east’s at 0.88 per cent.

By sector a few struggled – the IT industry saw insolvencies jump 21.66 per cent with 837 firms going under, taking the rate up from 0.65 per cent to 0.74 per cent.

But the other four of the top five sectors saw their fortunes improve.

The oil industry saw the biggest improvement with just 16 insolvencies in the year, a 46.67 per cent drop. That took its rate down from 1.08 per cent to 0.56 per cent.

“The rate of insolvencies is significantly lower now than when it was at its peak in 2009 at 1.25 per cent, but there is still a way to go before we reach the pre-recession rate of 2007, which stood at 0.97 per cent,” said Experian’s Max Firth.

“This is highlighted by the slight increase in insolvencies amongst larger businesses – which highlights the need for businesses to stay alert to changes which may affect them.

“Ongoing monitoring of all clients and suppliers regardless of size is essential, as the impact of larger corporate insolvencies can be felt down the supply chain.”