The Insolvency Index from Experian, the global information services company, has revealed that while the average business insolvency rate increased slightly in October, the UK's business community as a whole is now at its strongest financially since July 2008.
The average financial strength score of active businesses reached 81.14 during October, up from 79.80 in October 2008. This indicates that businesses on the whole are in a stronger financial position than previously with a smaller chance of failure in the next 12 months.
The business insolvency rate rose from 0.09 per cent in September this year to 0.10 per cent in October, with 10 businesses in every 10,000 going under. This represents a slight improvement on October 2008, when the insolvency rate was at 0.11 per cent.
Furthermore, the smallest businesses (with 1 to 2 employees) remained the most resilient, with only 0.06 per cent of the business population failing during October. Businesses falling into this 'micro' category also demonstrated the highest improvement in their financial strength score during October, up to 82.22. This compares with 81.90 in September 2009 and 80.85 in October 2008.
Rolf Hickman, Managing Director of pH, an Experian company, said: "Throughout 2008, the average financial strength score had been seeing a downward trend, but 2009 has seen a reversal. The financial solidity of UK businesses has been improving over the year.
"This has impacted on the insolvency rate, which has remained fairly stable since July, with a slight increase in October. If the financial strength of businesses continues to improve, we could see insolvencies maintain a low level and even start to fall."
Other highlights in October include:
Active businesses in all regions saw a month-on-month and year-on-year improvement in their financial strength scores.
The South West was the only region to see a year-on-year fall in the insolvency rate. All other regions saw an increase.
Yorkshire had the highest insolvency rate of any region and saw the highest month-on-month increase (0.12 per cent to 0.15 per cent). It is, however, lower than in October 2008 (0.16 per cent).
The highest insolvency rates were among businesses with 11 to 25 and 26 to 50 employees (0.28 per cent within both groups).
Business with over 501 employees had the best financial strength score during October (84.67), but were the only business type to see a year-on-year deterioration (from 84.92 in October 2008).
Food manufacturing (0.30 per cent), building materials (0.29 per cent) and engineering (0.25 per cent) saw the highest rate of failure during October 2009.
Health and household saw the highest month-on-month increases in insolvency rates. Wine, spirits and tobacco saw the highest year-on-year increases.
Breweries saw the most significant year-on-year improvement while the printing, paper and packaging sector saw the highest month-on-month improvement.
Although the postal and telecommunication sector had the worst financial strength score during October compared to other sectors (76.47), it did see its score improve from 76.29 in September 2009 and 74.57 in October 2008.
In comparison to September 2009, the food retail sector saw the biggest deterioration in financial strength (from 78.00 to 77.60). Compared to October 2008, property saw the biggest decline (from 84.90 to 83.83).