More than half a million UK businesses are in significant financial trouble, report finds
By Joe Hoppe
More than half a million UK businesses reported significant financial difficulties in the last quarter of 2021, up 5% quarter on quarter, according to new research from Begbies Traynor Group PLC.
Businesses should brace for a storm of insolvencies as state aid and creditor protection in the event of the coronavirus pandemic are cut short, putting 589,168 UK businesses in significant distress, the specialist has said of London-listed corporate restructuring in its fourth quarter red flag report.
County court judgments – a key warning sign of future insolvencies – have more than doubled in a year as creditors actively begin to use the courts to collect their debts.
The situation worsened further for companies that were already on the verge of bankruptcy, with companies in critical financial distress rising 7% year-on-year in the last quarter.
“The lag effect of the economic fallout from Covid-19, together with significantly higher inflation, has created a perfect economic storm for many businesses, especially UK SMEs. [small and medium-sized enterprise] sector, which will undoubtedly lead to even higher insolvency rates,” said Julie Palmer, partner at Begbies Traynor.
Ms Palmer added that inflation is now the biggest threat to the UK economy, with the real rate potentially well above the official rate of 5.4%.
The most struggling sector is support services, followed by construction and real estate and property services.
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