It came as a bit of a surprise to many that the insolvency statistics were not worse in the last quarter of 2011. These showed a year on year fall. Also, Experian has published their latest set and it shows an improving trend as well. The insolvency rate in January 2012 was just 0.07% which was the same as January 2011. January is on the whole a better month for businesses as they have benefited from the Christmas trading period. Smaller firms have done better with businesses with 101 to 500 employees saw a failure rate of 0.1 per cent, less than half the 0.21 per cent rate recorded in December.
So why do people think things are going badly for UK businesses? A clue is in the spread of the pain. In fact businesses with more than 500 employees have seen a rise in the insolvency rate from 0.07% in January 2011 to 0.2% this last month. That will be why.. Larger business failures get the headlines and January was a particularly bad month for some of the UK's high street retailers. Even Tesco issued a profit warning.
Generally speaking, insolvency statistics are not a great indicator of economic health as they are not "weighted" in terms of impact. A couple of small shops going under does not have the same impact as a large business shedding jobs but not actually becoming insolvent.