The financial health of businesses saw a significant improvement in 2009, while the annual rate of those becoming insolvent increased more slowly than in 2008, according to the latest Insolvency Index from Experian.

The global information services company reveals that the average financial strength score for businesses in the UK improved steadily throughout 2009 – rising from 79.46 in January 2009 to 81.37 by December. Experian says this has been helped by an overall improvement in the time it takes businesses to pay their suppliers.

Despite peaking in the first half of 2009, the sharp fall in business failures during the second half of the year helped alleviate the final number of insolvencies in 2009. Total insolvencies increased by only 12.0 per cent during 2009, compared to the 29.3 per cent increase during 2008, bringing the annual UK insolvency rate for 2009 to 1.25 per cent.

In addition, during December the rate of business insolvencies was 0.11 per cent, lower than the 0.12 per cent recorded year-on-year.

Rolf Hickmann, managing director of pH, an Experian company, said: "In 2009, businesses in Great Britain managed to climb back to a better place financially. Last year, it became clear that the businesses most successful at avoiding insolvency were the very smallest and the very largest ones. The highest insolvency rates in 2009 were among mid-range businesses.

"Many more businesses are taking steps to protect themselves from the risks of not getting paid; the impact on them if a key supplier or customer goes bust and indeed the risk of insolvency within their own businesses.

"With this in mind, businesses need to not only proceed with caution when it comes to both new and existing business clients, but also ensure that their own house is in order, so they themselves are appealing prospects for business."

Among the sectors showing improvement in 2009 were Postal and Telecommunications – whose financial strength score rose from 74.45 in December 2008 to 76.58 a year later, according to Experian’s index. Business Services climbed from 79.52 to 81.82, Media rose from 79.28 to 81.09 and IT was up from 80.10 to 83.83, while Banking and Financials crept up more slowly from 84.36 to 84.79, as did Printing, Paper and Packaging – from 78.25 in 2008 to 78.43 last year. 

Those sectors showing a slight dip year-on-year were Pharmaceuticals (from 81.94 to 81.51), Food Retailing (from 77.61 to 77.21), Property (84.79 to 83.63) and Insurance (84.94 to 84.89). 

More information: www.experianplc.com