May 18, 2012 • 12:28 pm

“70 firms are folding each day as the banks STILL refuse to lend.”

Daily Mail, 1 May 2012


Earlier this month the Daily Mail reported that credit-starved businesses were going bust at a rate of 70 firms per day.

These figures are taken from a press release produced by Experian, a credit reporting agency, which looks at the number of businesses going insolvent in March 2012.

It includes this table, which breaks the rate down by :

This shows that in March 2012 there were 2,112 insolvencies which works out to around 68 insolvencies a day. The press release also showed that in March 2012 of the 2,112 insolvencies recorded, 1,300, or 62 per cent, were businesses with 50 workers or fewer. The Daily Mail reported both these figures accurately.

But is this reason enough to conclude that 70 firms are folding every day?

The Department for Business, Innovation and Skills (BIS) also compiles statistics on company insolvencies. If you look through its data, you will see that it has been seasonally adjusted.

BIS notes that:

“Seasonal adjustment is a process by which changes that are due to seasonal or other calendar influences are removed to produce a clearer picture of the underlying behaviour of the data series.”

One month’s worth of data may not therefore be the strongest basis for assessing how many businesses go bust daily, as we don’t know how representative March is of the rest of the year.

Luckily, Experian have produced monthly figures on business insolvencies which can allow us to take a longer-term view of the situation.

The graph below, compiled by Full Fact with this data, shows that March 2012 saw a higher than usual number of insolvencies:

(Data for May 2011 was unavailable at time of writing.)

If we take the year up to and including March 2012, we can see that a total 17,662 insolvencies were recorded, an average on just over 50 per day over the 11 months for which there are data.

This matches almost exactly the daily rate that can be calculated from the BIS records, which show that on average 52 firms went bust per day in the first quarter of 2012.

What do these figures tell us?

Besides the raw numbers of companies going out of business that were featured in the Mail, the Experian data also looks at the rate of insolvency among firms.

This measures the number of companies going bust as a proportion of those in business, and the figures show that in March 2012 this rate had remained unchanged from the previous year, at 0.11 per cent.

So can the Mail legitimately claim that that data shows “the largest number of ‘business deaths’ since March 2010”?

We were unable to confirm this from the Experian press release so we contacted them and they were kind enough to provide us with the same additional information that they gave to the Daily Mail. These figures have been represented in the table below:

 

March 2010

March 2011

March 2012

Total number of firms

1,899,335

1,901,680

1,973,544

Total insolvencies

2,160

2,036

2,112

Insolvency rate

0.11%

0.11%

0.11%

As you can see the number of insolvencies in March 2012 was the largest since 2010. It is unclear how significant this is as the data only covers three years, however it is clear that the insolvency rate has not budged over this period.

Conclusion

The Daily Mail is accurate in its claim that in March around 70 businesses were closing a day on the basis of the Experian figures provided for March 2012.

However it is difficult to know how much to read into this: as a one-month snapshot of a dataset that is usually seasonally adjusted, this figure may be artificially high, and an analysis of the full-year data puts the daily rate of closure at closer to 50 businesses per day.

Furthermore a closer look at the Experian figures reveals that the rate of insolvency in March has not changed at all for at least three years, which places the Mail’s claim that March 2012 saw the “largest number of ‘business deaths’ since March 2010″ in some context.

 

Share this article:
By • 12:28 pm
A non-profit company (no. 6975984) limited by guarantee and registered in England and Wales. © Copyright 2010 - 2014 Full Fact