Smaller businesses ‘face a higher risk of insolvency’

Posted 28/10/2009

The rising rates of insolvency among UK businesses could be set to hit small companies harder than most, according to new research.

Information services company Experian has revealed that small businesses with between 11 and 100 employees have consistently been the enterprises most likely to face insolvency.

On average, 15 out of every 10,000 small companies have failed every three months since 2000, with that figure rising to a peak of 87 in the first quarter of 2009.

According to the analyst, these statistics increase the difficulty banks face in lending to smaller firms, with the complexity and relatively high-risk nature of such enterprises making them unprofitable for lenders to back.

This echoes the findings published by accountancy group Tenon earlier this week, which suggested that depressed lending conditions and low consumer demand are continuing to make the UK business climate difficult.

Carl Jackson, national head of Tenon Recovery, forecast that Britain is “unlikely to see a significant reduction [in insolvencies] for another three years”.