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Companies in Significant Distress Up Sharply in Third Quarter

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The number of companies across the UK which are in ‘significant distress’ financially increased sharply during the third quarter of the year.

According to the latest figures from Begbies Traynor and its ‘Red Flag Alert’ report, there are now close to 557,000 companies in a position of significant distress, which represents an increase of 6 per from the previous quarter.

The data suggests that around 30,000 businesses were tipped over into significant financial distress between July and the end of September.

Coronavirus and the measures taken to limit its spread have clearly taken their toll on businesses across the country, with more than 60,000 companies having become significantly distressed since the start of the pandemic in March.

Reflecting on the findings of its own research, Begbies Traynor noted that the figures for distressed companies could have been considerably higher if it were not for the fact that court activity has been curtailed due to the pandemic.

The corporate insolvency experts have said that many companies are “limping along” under severe financial pressures but haven’t yet been wound up partly because CCJs and winding up petitions are not being processed as they would normally be.

“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,” commented Julie Palmer, a partner at Begbies Traynor.

Ms Palmer went on to say that “a perfect storm is on the horizon” for companies in financial distress.

These companies will be battling against a combination of “grim economic data and very poor trading conditions,” she said. 

Begbies Traynor has suggested that the first quarter of 2021 could see a considerable rise in the number of insolvency cases as several factors come together to leave businesses running out of road across a range of different sectors.

Hospitality and retail sector companies are among those thought most likely to be hardest hit by Covid-19 restrictions and by issues of financial distress over the next six months.

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