There was mixed news for SMEs yesterday as the latest Insolvency Index from Experian uncovered an annual rise in business failures in February, despite an overall improvement in the financial health of UK firms.
The global information services company's monthly report found 0.10% of the UK's business population failed last month - up from 0.08% in February 2011 - as businesses continued to struggle with the vast array of cash flow pressures.
Over the same period, however, the overall financial health of UK businesses reached 83.86, which is up from 81.60 a year ago.
Companies employing between 51 and 100 staff recorded the greatest improvements in both readings, with their insolvency rate falling from 0.20% to 0.12% and the financial health rising to 85.41 from 81.68 in February 2011.
Indeed, the financial health score rose in every region across the UK and in all categories by business size to provide encouragement that trading conditions are gradually improving. Indeed, rising business insolvencies are a characteristic of an improving economy following a recession as cash flows become stretched from suppliers and customers.
UK Managing Director for Experian's Business Information Services division, Max Firth, commented: "Although business insolvencies increased slightly in February, our data is showing that UK business balance sheets have been improving gradually since August. Any increase in insolvencies among medium and large businesses highlights a riskier environment, particularly for the smaller firms that supply to them.
"Our insolvency figures underline the importance for smaller businesses to take as much care as their larger counterparts do when checking the creditworthiness of suppliers and customers before doing businesses with them."
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