Written by: Keith Tully
Published: 23rd March 2020
More than half a million British companies are in a state of financial distress, according to the corporate insolvency experts of Begbies Traynor.
In a report produced for the Times newspaper, the company reveals a 3 per cent increase in distressed businesses during the first few months of 2020.
There are growing concerns that significant numbers of distressed companies will soon find themselves tipped over into insolvency as the impact of the coronavirus outbreak is felt across the UK economy.
The total number of distressed companies across the country has risen by as much as 45 per cent from when Begbies Traynor first started collecting data on the subject in 2014.
According to the Office for National Statistics, there were 17,196 instances of corporate insolvency over the course of 2019 but that figure looks likely to be very easily surpassed in 2020.
Indeed, if even 5 per cent of the 500,000 financial distressed companies nationwide are pushed into insolvency then that would equate to 25,000 new corporate insolvencies.
A range of extraordinary measures designed to support businesses have been announced in recent days by the UK government but there’s little doubt that many companies will still be badly impacted by the coronavirus situation and by the economic downturn it has already precipitated.
Sectors in which financial distress is most prevalent right now include ‘real estate and property’, ‘sports and health clubs’, ‘hotels and accommodation’ and ‘food and beverage’.
The coronavirus outbreak has hit leisure, retail and travel industries particularly hard in recent weeks, with the government having ordered pub and restaurant closures and everyone being advised to stay home as much as possible.
The half million or so companies in financial distress account for around 14 per cent of all businesses in the UK.
Julie Palmer from Begbies Traynor says she expects to see financial distress among companies rising sharply in the third quarter of this year, rather than the second quarter, with the coronavirus situation forecast to have a somewhat delayed impact on corporate insolvencies.
“It’s a little bit like war,” she told the Times. “When you’re at war, people come together and try to help. It’s when you’re emerging from that war that it’s dangerous for businesses.”
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