More than half a million UK businesses are in “significant distress” due to the impact of the pandemic, according to new figures.
The latest Begbies Traynor red flag alert report for the past quarter revealed that 557,000 businesses are in particular turmoil as restrictions continue to cause instability across enterprises.
The insolvency specialists said the figures showed the biggest increase in distress among firms since 2017. They revealed 527,000 companies were in significant distress in the previous quarter.
It comes despite lower than average insolvencies as a ban on lease forfeiture and winding-up petitions has caused a backlog in company collapses.
Julie Palmer, partner at Begbies Traynor, said “a perfect storm is on the horizon” for the turn of the year as the end of support measures is expected to result in insolvencies and redundancies.
“With so many businesses limping along there could be a flood of insolvencies when the courts do get back to anywhere near normal capacity and attempt to clear the backlog of pending cases,” she said.
“This in itself, combined with the end of the furlough scheme and other Government support measures, is likely to have a material impact on the UK business failure rate.
“A combination of a grim economic data, and very poor trading conditions, particularly in the most vulnerable sectors such as hospitality, will take its toll, and this is expected to feed through to next year’s first quarter, particularly when the Government ends its high profile corporate life support measures.”
The report also revealed a 14% increase in the number of food and drug retailers in significant distress since the start of lockdown in March.
Across all sectors, there has been a 9% jump in the number of companies in significant distress since March, representing around 48,000 firms.