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Monday, 27 February 2012

Insolvency Statistics Again

It came as a bit of a surprise to many that the insolvency statistics were not worse in the last quarter of 2011.  See our blog on the latest statistics.  These showed a year on year fall.  Also, Experian has published their latest set and it shows an improving trend as well.  The insolvency rate in January 2012 was just 0.07% which was the same as January 2011.  January is on the whole a better month for businesses as they have benefited from the Christmas trading period.   Smaller firms have done better with businesses with 101 to 500 employees saw a failure rate of 0.1 per cent, less than half the 0.21 per cent rate recorded in December.

So why do people think things are going badly for UK businesses?  A clue is in the spread of the pain.  In fact businesses with more than 500 employees have seen a rise in the insolvency rate from 0.07%  in January 2011 to 0.2% this last month.   That will be why..  Larger business failures get the headlines and January was a particularly bad month for some of the UK's high street retailers.  Even Tesco issued a profit warning.

Generally speaking, insolvency statistics are not a great indicator of economic health as they are not "weighted" in terms of impact.  A couple of small shops going under does not have the same impact as a large business shedding jobs but not actually becoming insolvent.

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