The financial health of businesses in the UK has seen a significant improvement in 2009, while the annual rate of business insolvencies increased at a slower rate compared to 2008, according to the latest Insolvency Index from Experian.

The average financial strength score for businesses in Great Britain improved steadily throughout 2009 - rising from 79.46 in January 2009 to 81.37 in December 2009. 

According to Experian, this has been helped by an overall improvement in the time it takes businesses to pay their suppliers.

Despite peaking in the year 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 per cent during 2009, compared to the 29.3 per cent increase during 2008, bringing the annual 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 in the same month the previous year (December 2008).

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 in order, so that they themselves are appealing prospects for business."

Key highlights for 2009, included:

• North East saw the highest levels of insolvencies throughout the year.
• Scotland maintained the lowest rate of insolvencies in 2009.
• Although businesses in Greater London struggled most in terms of financial stability, with the lowest financial strength score throughout the year, it was the region to see the biggest improvement. 
• Businesses in South West maintained the highest financial strength score during each month of 2009.
• The smallest of businesses - those with 1 to 2 employees (0.75 per cent) - had the lowest annual rate of insolvencies, followed by the largest businesses - those with 501 or more employees (1.64 per cent).
• Businesses in the plastics and rubber sector had the highest annual insolvencies rate in 2009 (3.26 per cent).
• Health and house businesses saw the biggest improvement their annual insolvency rate - from 3.14 per cent in 2008 to 1.38 per cent in 2009.

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