Written by: Keith Tully
The UK will be faced with a wave of company insolvencies once the government’s business support interventions come to an end next year.
That’s the view of Ric Traynor, chairman of the corporate insolvency company Begbies Traynor, which is expecting to see a sizable increase in business failures over the course of 2021.
Speaking to the London Evening Standard, Mr Traynor suggested that financial distress is already widely in evidence among businesses across the country but insolvency rates have been kept relatively low largely because of government support.
In particular, Mr Traynor suggests that the option of putting staff on furlough and having the costs of their wages covered by the government in the context of the Covid-19 crisis has been taken up by companies that otherwise may well have been wound up by now.
“There are plenty of companies that are just avoiding insolvency to claim furlough money to protect staff,” he’s quoted as saying. “There is very significant distress out there, there is a bow wave of problems.”
Despite many thousands of businesses being hit very badly by the pandemic, insolvency rates have remained fairly low as companies have been able to access financial support that otherwise would not have been available to them.
However, the view of many experts on corporate insolvency like Mr Traynor is generally that business failure rates will pick up sharply next year as initiatives like the government’s furlough scheme come to an end.
For many businesses, while they have been able to survive the worst of the pandemic, it may be that the challenge of trying to re-establish financial viability and sustainability moving forward proves insurmountable in 2021.
The latest figures released by Begbies Traynor through its ‘Red Flag Alert’ report indicated that in the third quarter of this year there were roughly 557,000 businesses in the UK that could be categorised as being in “significant distress” financially.
That figure represented a 6 per cent increase compared to the second quarter of the year and the sharpest quarterly rise recorded since 2017.
Hospitality businesses were among those being most affected by the pandemic and becoming most vulnerable to insolvency as the virus crisis continues.
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