East Anglia: Small firms under pressure as business failures rise

SMALL businesses were feeling the strain last month, with a rise in the number going bust, new UK figures reveal

Most regions saw a rise in company failures compared to May 2011, including the eastern region, where insolvencies reached 189 – an increase of 32% on the same month last year, according to Experian’s Business Insolvency Index.

While the figures revealed that, overall, the business failures rate was the same as May 2011, there was a slight increase on April 2012, a rise which was driven primarily by smaller employers.

Firms with six to 10 staff saw their failure rate increase from 0.17 per cent in May 2011 to 0.20 per cent last month.

It was the first time this size band experienced the highest rate of insolvencies compared with larger and smaller firms.

A total of 1,841 services companies failed during May – the same rate as in May 2011, and also a slight increase from the April 2012 figures.

Max Firth, UK managing director for Experian’s Business Information Services division, said: “By the time a firm grows to six to 10 employees, the flexibility it benefited from as a micro business begins to disappear.

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“Fixed overheads become greater and cash flow starts to cause more serious issues if not carefully monitored. Our data has shown that historically, the highest insolvencies have consistently been experienced by firms that have between 10 and 100 employees. If a good credit management process is not implemented before reaching this size, then a firm may find it significantly harder to keep its head above water as it grows.”