Almost 100,000 more UK businesses have tumbled into financial distress in the past three months as the impact of the pandemic continued to weigh on firms, according to new research.
The latest quarter Red Flag Alert report by insolvency specialists Begbies Traynor found that around 723,000 businesses were in “significant financial distress” in the quarter to the end of March.
It said this represented a jump of 93,000, the largest increase reported since the research started in its current form in 2014.
This was a 15% increase from the end of the fourth quarter of 2020, as many firms stopped trading again during the third coronavirus lockdown.
Begbies Traynor’s data highlighted that this represented a 42% jump in companies in financial distress since one year earlier, prior to the full impact of the pandemic.
It said this included particularly sharp increases for companies in the logistics and real estate sectors.
However, Julie Palmer, partner at Begbies Traynor, warned that yet more companies could slide into insolvency despite the easing of pandemic restrictions.
“The dam of zombie businesses could be about to break,” she said.
“Opening the doors of consumer-facing businesses on April 12 may well seem like a big step in the right direction for many of these companies as they try to shake off the traumatic trading of the last 12 months.
“However, our experience shows that unmanageable levels of debts and subsequent overtrading are likely to be the hidden icebergs waiting to sink even the highest profile businesses.”
She added the companies should act quickly to find financial support if they are facing financial distress.
Ms Palmer said: “Businesses that were profitable before the pandemic, have manageable debt and are still relevant in the post-pandemic world could flourish and be the real winners in this climate.
“They need guidance and need to act quickly. In a market that is moving fast, dithering companies will be swept away in the sheer force of distress that is forcing its way across the UK.”