Latest Insolvency Index – Debt Recovery, Bad Debt & SME’s

The latest Insolvency Index from global information services company Experian, has indicated that the rate of business insolvencies dropped to 0.08% per cent in August, which is lowest rate since February 2011.

There was a negligible increase when compared to the rate in August last year which was 0.07% of the business population becoming insolvent for the same period. Although the rate is somewhat lower than previous months the overall financial strength score of businesses in the UK dropped from 81.06 in August 2010 to 79.18 in August this year. However, large companies saw their financial strength score improve from 81.06 to 85.91 so the underlying theory is that the UK’s small and medium sized businesses have taken the brunt of the downgrade.

It was also the largest companies that saw insolvencies drop year on year with businesses employing 11-50 employees performing the worst in August with the highest rate and 0.21 per cent of the business population failing.

Sector wise, it is perhaps no surprise (given fuel prices) that oil companies remain at the top of the business performance table with the highest score at 80.74 in contrast to Food Retailers still at the bottom with 74.22. With quarterly rents due, no sales improvement and a lack of trade credit insurance in the retail sector, there is certainly little to remain upbeat about for retailers at the moment.

Although the figures may suggest an improvement to the UK corporate players, small and medium sized UK businesses still account for 60% of all private sector jobs in the UK work force and they contribute half of all the UK’s total income (GDP) so whilst one half may be improving, it seems to be at the detriment of the smaller players. This is somewhat troubling given the importance of small business sector to the UK economy and perhaps indicative of tougher times ahead for the UK small business population.

This is further supported by the reports that late payment problems are worsening for SME’s, especially those which supply to larger firms. Whilst the large commercial players are benefiting from government contracts being settled within 5 working days, they are not passing down the prompt payments to their own SME suppliers. This has led to wider public criticism, and prompts for the government to act.

The outlook remains challenging for micro, small and medium sized UK businesses and in the run up to Christmas, with many non retail sectors seeing seasonal drop off, cash flow will become more critical as the new year approaches.

If you wish to engage CCDR to help protect and shield your business from late payments or your debtors going into liquidation, call us today and we can assist you in being proactive to reduce future bad debts through services such as our Outsourced Credit Control, or for those where the debtor isn’t paying, we have a range of services such as Debtor Tracing, Debt Mediation or Debt Recovery depending on what stage your late payment problems is affecting your business.

CCDR is a leading Liverpool Debt Recovery specialist with international reach and a client base of SME’s and multinational organisations.

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