Pandemic impact: Another 100,000 UK businesses tumble into financial distress
Almost 100,000 more UK businesses have tumbled into financial distress in the past three months as the impact of the pandemic continued to weigh on firms, according to new research published this morning.
The latest quarter Red Flag Alert report by insolvency specialists Begbies Traynor found that around 723,000 businesses were in “significant financial distress” in the quarter to the end of March.
It said this represented a jump of 93,000, the largest increase reported since the research started in its current form in 2014.
This was a 15 per cent increase from the end of the fourth quarter of last year, as many firms stopped trading again during the third coronavirus lockdown.
Begbies Traynor’s data highlighted that this represented a 42 per cent jump in companies in financial distress since one year earlier, prior to the full impact of the pandemic.
Logistics and real estate
It said this included particularly sharp increases for companies in the logistics and real estate sectors.
However, Julie Palmer, partner at Begbies Traynor, warned that yet more companies could slide into insolvency despite the easing of pandemic restrictions.
“The dam of zombie businesses could be about to break,” she said. “Opening the doors of consumer-facing businesses on 12 April may well seem like a big step in the right direction for many of these companies as they try to shake off the traumatic trading of the last 12 months.”
However, Palmer added that “our experience shows that unmanageable levels of debts and subsequent overtrading are likely to be the hidden icebergs waiting to sink even the highest profile businesses.”