Published on 26 - January - 2012
Insolvency rates hit DIY and hardware retailers hardAlmost 3,000 businesses falling under the umbrella categories covering DIY and hardware suffered insolvency last year, according to new data and analysis released by Experian this week.
The garden centre industry, however, held onto its front-running financial strength from 2010 to 2011, and despite a drop of two points came out second only to the oil sector.
Retailers falling into the 'non-food' category, which an Experian spokesperson said included "the retail sale of hardware, paints and glass" were hit particularly hard, with 1,251 insolvencies in 2011. The figures showed 1.49% of these businesses failed last year, a significant increase on 2010's 1.29%, bringing its financial strength score down two points from 78.85 to 76.70.
A further blow was delivered to the wholesale sector, which saw 931 businesses fall into insolvency and its financial strength drop from 79.74 to 78.19. However, the rate of business failure remained unchanged since 2010 at 1.53%.
Building materials, encompassing the wholesale of hardware, plumbing and heating equipment and supplies, fared rather better with just 72 insolvencies according to the report. The proportion of business failure improved from 2.09% in 2010 to 1.96% last year.
Another sector which saw less businesses fail in 2011 than in 2010 was engineering, which Experian stipulated as "the manufacturing of tools, cutlery and general hardware." While the sector suffered 674 insolvencies, its proportion of business failure improved from 1.92% to 1.71%.
It was the garden centre parent industry - listed as agriculture, forestry and fishing - which came out near the top of Experian's retail financial strength table. With a score of 83.47 and just 107 insolvencies, the industry was just 0.02 points behind the strongest retail sector, oil. Cracks did show, however, with the sector's business failure rate increasing from 0.46% to 0.51%.
Overall, the findings showed only a slight increase in Britain's business insolvency rate, which went from 1.03% in 2010 to 1.1% last year, leading experts to adopt an optimistic take on what the numbers mean for the future of the economy.
Experian's managing director for the business information services division Max Firth said: "Given the challenging economic climate in 2011, businesses in the UK were pretty resilient and this was reflected by the stable insolvency rate during the year.
"For businesses to improve their financial health and avoid insolvency, it is vital that they understand the risks they are expected to and have strategies in place to protect themselves. By monitoring the performance of all current and potential clients, they can fully understand and prepare for the impact they could have on them if they failed."
Firms with one or two employees saw the biggest increase in the insolvency rate during 2011 - from 0.63% in 2010 to 0.71% in 2011. Despite this increase, SMEs still managed to maintain the lowest rate of insolvencies compared to their larger counterparts.
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