AGAINST a still uncertain economy, the smallest businesses are showing the greatest financial robustness.

Micro businesses of one to two employees – those typically run by owner-drivers – showed the greatest increase in financial strength, rising from 81.32 to 82.22 in August 2010, according to the latest Insolvency index compiled by information services company Experian.

Experian also reported that largest companies fared worse for insolvencies, while the rate of business insolvencies overall had dropped to 0.07% in August, the lowest since June 2007, the company said.

“It continues to be evident how quickly fortunes can change,” commented Max Firth, managing director of the Experian company pH.

Mr Firth also added: “This picture on insolvencies is very different to the one we saw back in March this year when all regions, bar one, saw an increase in insolvencies and the rate was almost double at 0.11%. August’s figures also show an easing off of the North South divide we saw in June, with the North East going from the region with the highest insolvency rate to one of the seven regions that shared the lowest insolvency rate of 0.06%.”

The robust response by small businesses is even more remarkable given the lack of lending available to smaller firms.

Aldermore, the British bank that specialises in loans to SMEs, reports lending from UK banks to businesses had been cut by £32 billion since the collapse of Lehman Brothers two years ago, hitting SMEs hardest as they don’t have as many options to find alternative funding as larger businesses.

“There are still many healthy, promising businesses out there that are being refused funding from high street banks and this is simply because banks don’t have the balance sheet strength to lend to smaller companies,” said Phillip Monks, chief executive of Aldermore.

“Two years on from the Lehman collapse we must ensure this issue does not get kicked into the long grass,” Mr Monks added.

Highlights of the Experian report on insolvencies

• Over half of the UK’s regions experienced the lowest rate of insolvencies at 0.06%.

• Businesses in the South West led the increase in financial strength with their score rising from 82.23 in August last year to 82.73 in August 2010.

• The largest businesses (more than 501 employees) were the only ones to see an increase in the insolvency rate, in comparison to businesses of other sizes, from 0.09% in August 2009 to 0.145 in August 2010.

• The Leisure and Hotel industry saw the biggest increase in financial strength, going from 78.10 up to 79.34 in August 2010.

• The financial strength of businesses in the Food Retailing sector fell the furthest – from 78.58 in August last year to 75.74 this year, making it the sector with the lowest score.

Insolvencies drop to lowest level since June 2007