British firms ended the financial year stronger than they began it, according to the latest Business Insolvency Index from global information services company Experian.

The average financial strength score, which indicates how likely a firm is to fail in the next 12 months, improved from 80.99 going into April 2010, to 81.58 by the end of March 2011. The largest increase came from mid-sized companies, those with between 100 and 500 employees. The average score for this segment of the business population rose from 81.18 to 82.81.

The data also shows that during the last fiscal year, the average annual financial strength score was 81.14 – an improvement on FY09/10 when it was 80.83.

Meanwhile, March’s monthly insolvency rate was 0.11% — the same as that recorded in March 2010. Firms with 11-25 employees continued to have the highest insolvency rates, while the North-East and Yorkshire also continued to record the highest rates of insolvency.

For the full financial year, the insolvency rate fell to 1% from 1.20% for FY09/10.

Max Firth, managing director of Experian pH, says: “Companies transitioning from being a small to a medium-sized business are often among those most prone to failure, and our March data confirms this as companies with 51-100 employees continue to have the worst financial strength score.

“Those operating in the lending market, or financing clients and suppliers, must ensure they have an accurate and up-to-date picture of each business’s potential, risk profile and vulnerability to changing market conditions.”