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Experiasn publishes UK Business Insolvency Statistics

By CreditMan Thursday, February 5, 2009

Experian®, the global information services company, has published its insolvency data for 2008. Its analysis shows that there were 23,879 business failures over the 12 months to the end of December 2008, representing a 30% increase on 2007. In terms of cities, London and Birmingham were the UK’s insolvency hotspots in the final quarter of the year with 1,221 and 381 businesses respectively failing in the two cities.

The latest Insolvency Report and Distress Index from Experian’s Business Information division highlights that from October to the end of December 2008, 7,238 businesses failed. This represents a 52% increase compared to Q4 2007, which saw 4,751 failures.

Tony Pullen, Managing Director of Experian’s Business Information division, commented: “Relying on sparse financial information and out of date accounts to make business-critical decisions could have devastating consequences for organisations. More than 65 firms failed every day in 2008 and this underlines why it is vital that organisations use real-time data insight to determine whether or not to do business with a company.

“We recommend that companies use this valuable information to their advantage as an early warning system to alert them to customers or suppliers heading into difficulties. Warning signs can include a major reduction in share capital, late filing of accounts through to adverse notices, such as County Court Judgements. We also advise clients to use payment performance data to identify companies’ payment patterns and worsening payment trends, which are strong indicators of reduced cashflow, which can then lead to possible insolvency. This level of insight will not only indicate whether a customer is likely to pay, but also when – a powerful tool in today’s climate.”

Sector analysis
Of the 34 sectors monitored, 25 saw increases in insolvencies in 2008, compared to just nine over the course of 2007. Only five sectors – Oil, Plastics & Rubber, Printing Paper & Packaging, Pharmaceuticals and Insurance – did not see an increase in the final quarter of the year compared to the same period in 2007.

The Property sector was significantly impacted in 2008. It saw the highest increase in the number of insolvencies over the year – an additional 1,233 on top of 2007’s figure bringing the year’s total to 1,935 (an increase of 176%). Failures in the Business Services sector increased by 1,156 during 2008 to reach 5,412 – representing an increase of 27%. The third highest increase in failures came in the Building & Construction sector, with 2,391 firms failing, up 28% on 2007’s figure.

Regional overview
All 14 regions monitored by Experian saw an increase in insolvencies in Q4 2008 compared to Q4 2007 and also during 2008 versus 2007. Whilst the South East saw the highest number of failures in 2008, with 4,990 firms going under (up by 794 or 19%), it was the North West that saw the biggest leap in failures. Almost 1,000 more businesses failed in the region in 2008 compared to 2007 - up by 41% to 3,437 failures from 2,441.

Scotland experienced both the lowest percentage and actual increase in insolvencies in 2008 compared to 2007. Over the year, there were 983 corporate failures, 101 more than in 2007 and an increase of 12%.

The UK’s major cities – London, Birmingham, Manchester and Leeds - led the rankings for the number of insolvencies in the final quarter of the year. Only three cities – Liverpool, Derby and Oxford – experienced a decline in the number of business failures in Q4 2008 compared to Q4 2007.

Types of insolvency
2008 saw a 143% increase in receiverships compared to the previous year, a clear sign of the caution in the banking sector and the fact that they are quicker to call in debt.

Voluntary liquidations are still the most common type of business failure. In 2008 some 11,255 businesses were put into liquidation by their shareholders, representing an increase of 24%.

Businesses can visit www.experianbi.co.uk for information on how to avoid becoming an insolvency statistic.