Insolvency figures suggest North-South divide

The good news is that insolvency figures are down slightly - but then so is financial strength, which suggests more doom and gloom to come.

by Emma Haslett
Last Updated: 25 Jan 2012
We all know this year has been pretty disappointing, as far as recovery is concerned - but now figures by Experian show that it’s been more disappointing for some than others. The data company has found that a North-South divide has emerged when it comes to insolvencies. Thus, while the number of companies calling in the administrators during October and November actually fell for London and the South East, in the country’s northern regions, things looked decidedly more grim.

According to the figures, during November, the highest number of insolvencies were in the North West, where 0.14% of businesses had to call in the administrators, while the North East and Yorkshire also suffered, with insolvency figures of 0.13% and 0.11% respectively. In the South, on the other hand, things were positively peachy by comparison: the South East led the table, with just 0.7% of companies slipping into insolvency, while 0.08% of businesses in both the South West and Greater London went out of business. Which puts the average fall at about 0.9%, or 1,736 firms month-on-month - just a smidge lower than October’s figure of 0.10%. Although admittedly, that figure’s higher than November 2010’s figure of 0.07%

But while the month-on-month insolvency figure fell, the average financial strength of businesses also dropped, by a more alarming 0.5%, from 78.44 in October to 78.07 in November. Which, admittedly, doesn’t mean much - until you compare it with the figure from this time last year, which was 81.31. So you can see how far it’s fallen. And in many ways, a bad figure for financial strength is worse than a poor insolvency figure, because it gives us an indication of what’s to come.

Those who experienced the biggest fall in financial strength were the smallest businesses, with 3-10 employees, which have generally survived well over the past year. But there’s a suggestion things are about to get tougher, after their finances weakened from 81.80 in November 2010 to 81.04 now.

The only ray of light among the doom and gloom is the property sector, which actually saw its insolvency rate improve over the year, down from 0.07% in November 2010 to 0.06% in 2011, and from October, when it was 0.08%. But it looks as though that may be a one-off. Brace yourselves for a tough year ahead.
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