More than half a million businesses are in “significant distress” because of the pandemic, according to research.
A resurgence in coronavirus cases has put more pressure on companies still recovering from the first lockdown. Begbies Traynor, the insolvency consultancy, said it had found that 557,000 companies are now in financial distress.
Julie Palmer, a partner at Begbies Traynor, said: “A combination of 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 corporate life-support measures.”
Debt levels have risen sharply in recent months as companies tapped the government’s emergency loan schemes to cope with a slump in trade. Repayments are due to begin in the second quarter of next year, but economists are warning that businesses will struggle to pay back the money.
According to a report by The City UK, the lobby group, and EY, the professional services firm, a quarter of a million companies are at risk of collapsing under £35 billion of unsustainable debt. Experts say that the country will need to prepare courts for a flood of bankruptcies.
Begbies Traynor concluded that ten out of the twenty-two sectors analysed had experienced double-digit percentage increases in financial distress this year. Food and drug retailers experienced a 14 per cent jump to 14,806.