A closely-watched report has noted the largest quarterly leap in the number of businesses suffering significant financial distress since 2014 following a year of coronavirus disruption.
The latest Red Flag Alert produced by insolvency specialists Begbies Traynor measured a jump of 93,000 firms in the first quarter of 2021, a period that took in the anniversary of the UK’s first COVID-19 lockdown last March.
It meant there were 723,000 businesses suffering in total, the report said, a 42% increase over the past year.
The quarterly rise was put down to the latest enforced shutdowns of parts of the economy deemed non-essential as UK national governments sought to curb the spread of the virus and protect citizens through the vaccination rollout.
Begbies Traynor said companies in the logistics and real estate sectors saw particularly sharp increases in hardship over the first three months of 2021.
It warned that an easing of lockdowns may not be able to prevent many companies in distress from sliding into insolvency.
The latest Insolvency Service figures showed 992 companies in England and Wales were declared insolvent in March – a rise on the start of the year but still 20% down on March 2020.
Data for Scottish and Northern Irish companies shows a similar picture.
Julie Palmer, partner at Begbies Traynor, urged those in trouble to seek help without delay.
She said: “The dam of zombie businesses could be about to break.
“Opening the doors of consumer-facing businesses on April 12 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, 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.
“Businesses that were profitable before the pandemic, have manageable debt and are still relevant in the post-pandemic world could flourish and be the real winners in this climate.
“They need guidance and need to act quickly. In a market that is moving fast, dithering companies will be swept away in the sheer force of distress that is forcing its way across the UK.”
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