The number of businesses in a position of critical financial distress increased by almost a fifth during the first quarter of 2022 as compared to the same period a year ago.
According to the latest numbers from the corporate insolvency experts of Begbies Traynor, there were 1,891 companies in a critical financial position in Q1 2022, which represents a steep increase compared to last year.
A closer look at the data shows that the sharpest increases in endangered businesses were seen within the construction sector and among bar and restaurant operators.
Indeed, the numbers show that there was a 51 per cent jump in the number of critically distressed construction firms in the first quarter and a 42 per cent increase within the bar and restaurant sector.
Begbies Traynor’s assessment of the current landscape for businesses in the UK is that there is likely to be a notable rise in corporate insolvency cases as the year goes on.
Supporting that assessment are the latest County Court Judgement (CCJ) figures which increased by 157 per cent in the first quarter of this year compared to the same period in 2021.
CCJs reflect the number of creditors pursuing their debtors through the courts and they are generally taken as an indicator of likely future insolvency rates.
Unusually high rates of inflation, as has been seen throughout most of 2022, are also expected to push a growing number of companies towards insolvency in the coming months, according to Begbies Traynor.
Julie Palmer, a partner with the company, has said that unless there is swift government action to support struggling companies then a steep rise in corporate insolvency rates looks likely.
“The critical distress and CCJ data are likely predictors of a wave of insolvencies coming – it’s just a case of when the dam holding it back finally bursts,” she said in response to her company’s own findings for the first quarter of this year.
Ric Traynor, Begbies Traynor’s executive chairman, has also noted that inflationary pressures have now become the prime concern for businesses across the country.
“The effects of increasing costs are now starting to take their toll on businesses and consumers alike,” he said.
“This could mean that companies which have just been surviving, being kept alive only by government support, finally succumb to the inevitable,” he added.