According to Experian’s latest Business Insolvency Index, the average financial strength score of UK firms increased from 80.99 to 81.58 in the last year. This score shows how likely it is that a company will fail in the next year. The number of businesses to fail in Wales remained the same year on year, with 67 insolvencies in both 2010 and 2011. The biggest increase in the financial strength score, was for mid sized companies who have between 100 and 500 employees.
The highest rates of business insolvency were in the North East and Yorkshire, and companies with between 11 and 25 employees were struggling the most. Although the increase in financial strength scores is reassuring, the survey also revealed that industries with weaker financial scores include food retail, clothing and textiles, postal and telecommunications. The worst financial strength score is the companies with 51 to 100 employees, while companies who are moving from being small to mid sized are most likely to fail.
Financial institutions including the lending market and those financing suppliers and clients, should obtain an accurate picture of the company’s financial health, risk profile and vulnerability to changes in market conditions. Companies who may be considering applying for financial assistance should outsource to a small business accountants so that they have the necessary information required by financial institutions. Businesses considering future development will benefit from a financial forecast from a low cost accountant who can minimise the risk of failure and increase the likelihood of success.
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