IT firms grow more resilient to closure

An upturn in confidence among IT firms seen last month appears to have been more than just wishful thinking, fresh insolvency figures for the sector indicated yesterday.

The research, carried out by Experian and said to be the most comprehensive view of business failures, shows that the number of jobless IT owner-managers is falling.

Taken with findings from a poll of businesses, also conducted in August, the figures suggest that, while they are the most confident, IT firms are also increasingly resilient.

Companies in the IT sector traced by Experian showed a near five per cent decline in the number of them going to the wall, compared with the August 2008 figure.

This means IT firms' insolvency rate is 0.05%, significantly below the UK average of 0.09%, which is marginally higher than a year ago but is still the lowest rate in 2009.

This partly explains why although the average 'distress' rate for UK firms has fallen since July this year, it is still running slightly higher than the rate for IT businesses.

In other words, IT firms are less likely than the average firm to think that their venture will fail in the near future, even though the average firm feels its staying power has increased.

Yet is still too early to tell whether fewer companies being forced to shut down is an indication of a more positive outlook, said Rolf Hickman, of analytics firm pH, an Experian company.

"One thing is for sure," he said. "Businesses are distinctly aware of the current environment and the need to be cautious in any business dealings.

"We have seen a significant increase in businesses monitoring the health of suppliers, customers and partners…in order to ensure they do not suffer from the impact of another business becoming insolvent."

Elsewhere, the findings show that the number of one-person businesses declaring insolvency has risen by more than a third since last year, equating to the loss of 214 sole-person traders in August.

However, a one-person firm currently has a lower distress rate than both giant companies, with between 100 and at least 500 employees, and small employers, with up to 25 people on the payroll.

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