The annual rate of business insolvencies in 2010 fell for the first time in two years – a sign of the gradual return of the financial health of UK businesses, say data analysts at Experian.

1.04% of businesses in the UK failed in 2010, compared with 1.25% in 2009 – the first annual drop for two years. The total number of insolvencies decreased from 24,209 in 2009 to 19,946 in 2010, equating to an 18% drop.

March 2010 saw the greatest number of insolvencies for the year when 0.11% of the total business population failed. From March onwards, the failure rate saw a general improvement, hitting an annual low of 0.07% in August and again in November.

The UK’s business community finished 2010 stronger than it started the year. The average financial strength score of UK businesses fell from 81.16 in January to reach its lowest point of 80.70 in May, but since recovered to reach a full year high of 81.35 in December.

Max Firth, managing director of Experian PH, said: “2010 has been a period of relative stability for business insolvencies and the improving trend in the insolvency rate has been positive. This contrasts significantly to the last major recession of the early 1990s when the rate escalated over a long period and peaked even as the country came out of recession.

“Insolvency trends in 2010 included a North-South divide, with firms in the South of England faring better, as well as a reversal of fortunes for the largest companies. Taken as a whole, those with more than 500 employees were not as resilient as they were in 2009. This demonstrates how quickly circumstances can change and how important it is for all firms to monitor the performance of other businesses they deal with to fully understand the impact they could have on them if they failed.”

RESEARCH HIGHLIGHTS

-Yorkshire saw the highest rate of insolvencies throughout the year with an annual rate of 1.48%.

-Scotland maintained the lowest rate of insolvencies in 2010

-Businesses in Greater London struggled most in terms of financial strength, with the lowest average score throughout the year of 79.85.

-Yorkshire was the region to see the biggest improvement. Businesses saw their average financial strength score rise from 79.46 in 2009 to 81.09 in 2010.

-Businesses in South West maintained the highest average financial strength score of 2010 at 82.67.

-Businesses in the plastics and rubber sector continued to have the highest annual insolvency rate in 2010 (2.33%).

-The financial strength of food retailers fared the worst in 2010 dropping from 78.03 in 2009 to 75.99, the lowest score of all the sectors.

-The oil industry continued to have the strongest financial strength score at 85.88.

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