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Companies in ‘Significant Financial Distress’ Up by 27 Per Cent

By Jon Munnery
28 January 2021

The number of companies across the UK in a position of ‘significant financial distress’ increased by 27 per cent year-on-year between the final quarters of 2019 and 2020 respectively.

That’s according to the latest figures released by the corporate insolvency experts of Begbies Traynor, which suggest there were in the region of 630,000 businesses in significant distress as of early 2021.

On a quarterly basis, the number of firms in significant distress jumped by around 13 per cent from the third to the fourth quarters of 2020, which represents the sharpest such increase recorded since Q2 2017.

According to the latest data, the numbers of significantly distressed companies increased in the final few months of last year across all 22 sectors assessed by Begbies Traynor and its ‘Red Flag Alert’ research.

The figures are understood to reflect some of the pressures that businesses across the country have been experiencing in recent months as the coronavirus pandemic continued to wreak havoc throughout the UK economy.

However, Begbies Traynor’s expert view is that the number of companies being forced out of business would inevitably have been considerably higher over the past year or so if government support had not been provided as it was.

Expectations are that the latest national lockdowns will again badly hurt the cashflows and threaten the viability of many thousands of UK companies.

Indeed, Julie Palmer from Begbies Traynor has suggested that for businesses across a variety of sectors the government’s emergency financial support will only provide a “stay of execution” for many struggling firms.

“Although the government has extended its Covid-19 financial support, this simply won’t be enough for thousands of businesses who likely will not survive in the interim,” Ms Palmer said in a statement.

“The harsh reality is that the government will have to be ruthless when handing out rescue funds, because not all businesses will be sustainable, even when the flood waters subside,” she added.

Hopes are that Covid-19 vaccines will be successfully rolled out soon in ways that change the prevailing circumstances in which UK companies are operating but Ms Palmer has said she fears “the situation is going to remain bleak over the next quarter and beyond”.

Jonathan Munnery
Partner
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