Johannesburg, 14 Dec 2010
* Irish business community grew stronger in Q3, according to international analysis from Experian.
* UK business community grows stronger in Q3, failures decline by 18%.
* US failures down 3% year-on-year, very high-risk firms up 21% since start of 2010.
* Business failures increase in Denmark to more than twice the rate of neighbour Norway; 22% decline in Brazilian business failures.
Nottingham, UK - Experian, the global information services company, today published new analysis showing signs of improvement in Ireland's business community during Q3.
Since the start of 2010, the proportion of businesses at 'very high risk'[1] of failure within the next 12 months has fallen by 5%. Over the same period, the number of 'high-risk' business has also fallen by 11%, while there was a 15% increase in 'very low-risk' firms.
The failure rate for Irish businesses also improved during Q3. Three-hundred-and-eighty-six Irish businesses failed at a rate of 2.1 in every 1 000 firms, and while this represented an increase of just 1% year-on-year, it was an improvement on the more than 400 failures that occurred in both Q1 and Q2 2010.
The manufacturing, construction, motor and transport sectors, which struggled in the initial stages of the recession, have stabilised, with some even seeing their rate of failures decrease. Nevertheless, Experian's analysis shows that Ireland's business community is still far weaker than it was at the start of 2009.
These findings are based on the Experian Business Health Index (BHI), new analysis comparing the strength of business populations in Brazil, Denmark, Ireland, Norway, South Africa, United Kingdom and United States.
In the United Kingdom, the proportion of 'very high-risk' businesses has fallen by over 20% since the start of 2010. Four percent of firms in the UK were at 'very high risk' of failure at the end of Q3, compared with 6% in January 2010. UK business failures also continued to fall during Q3; 5 259 firms, 2.7 in every 1 000, failed in the three months to the end of September, 18% fewer than the same period in 2009.
The property and textiles/clothing sectors experienced the most significant reduction in insolvency rates, down by 38% and 46% year-on-year in Q3.
The proportion of very high risk businesses in the United Kingdom compares favourably to all other countries covered by the BHI, including the United States, where 12% of businesses were 'very high-risk' at the end of Q3 - an increase of 21% since January 2010.
Equally, at the other end of the spectrum, the proportion of 'very low-risk' companies also grew (by 16%) during the first three quarters of 2010.
In the United States, which has a far bigger business population, there were 21 098 business failures in the last quarter, 3% lower than Q3 2009. This was driven by improvements in the finance and manufacturing sectors, where business liquidations fell by 33% and 27% respectively.
In Northern Europe, the proportion of 'very high-risk' firms in Norway increased by 32% since the start of 2010, almost double the increase in Denmark (18%). Fifteen percent of Danish firms are now 'very high-risk', compared with 10% of Norwegian companies. The proportion of 'very low-risk' firms has fallen by 4% in Denmark since the start of the year, while in Norway, their number had grown by 9%.
The 1 508 Danish businesses failed in Q3, 18% more than Q3 2009, with the entertainment, culture and sport sector seeing the biggest relative increase. Denmark's failure rate of 2.4 in every 1 000 firms during Q3 was more than double that of Norway, where 1 108 firms (1.2 in every 1 000) went out of business.
Failures have fallen by 14% in Norway since the start of 2010. A 27% year-on-year increase in insolvencies among firms in Norway's entertainment, culture and sport sectors was more than off-set by a 75% fall in finance and insurance sector failures. Failure rates were also down by more than 30% among Norway's manufacturers and construction firms.
Elsewhere, South Africa's 'very high-risk' business population shrank by 13% since the start of the year to 8% of all businesses, and year-on-year failures were down 21%. Mining, financial intermediation, insurance and real estate were South Africa's strongest sectors in Q3.
Although the proportion of 'very high-risk' firms in Brazil has increased by 4% since the start of the year, the 'very low-risk' business population also grew by 4% over the same period. There were 22% fewer failures in Q3 than the same period in 2009. Higher wages and lower unemployment rates were particularly beneficial to Brazil's food and beverage, supermarket and airline sectors, which all got stronger in Q3.
Marco Benvenuto, Credit Services Managing Director at Experian EMEA, commented: “While the global economic downturn impacted everywhere, some business communities have proved far more resilient than others. The number of businesses becoming insolvent fell quarter-on-quarter in each of the countries we analysed in the three months to the end of September, however, this masks fluctuating fortunes across them.
“The Irish business community suffered two incredibly difficult quarters in the first half of the year, but showed some subtle signs of improvement during Q3. Meanwhile, Denmark is being outperformed by its neighbour Norway, and the year-on-year increase in business failures could well continue given an accompanying increase in the very high-risk business population.
“Our analysis shows that there are both good and bad business prospects in every economy and it is vital that firms understand and proactively manage the risk associated with each and everyone they do business with.”
Methodology
Experian owns and operates business credit bureaux in the US, UK, Brazil, China, Denmark, Estonia, Ireland, Italy, Norway and South Africa, and also has an interest in a bureau in Singapore. Experian's International Business Health Report currently incorporates data from seven of its bureaux to show how the health of the business populations of each country (measured by business failures and likelihood of business failures within 12 months) has changed over time in each country, and how that change compares with other countries. Business failure rates, which are calculated by comparing the number of businesses that failed with the total known business population in each country, are included where appropriate.
Due to local differences in the data sources and scoring methodologies that occurs between bureaux, as well as the respective size of each country's business population, Experian's business information experts have created indices based on the raw data to allow comparisons to be made. The base for the Business Failure Index was set by taking the average quarterly number of business failures in each country since the beginning of 2009 as 100. The Business Strength Index is based on each country's existing scoring methodology, with risk bandings established based on a uniform proportion of firms in each country falling into each band during 2009.
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