Insolvency firm Begbies Traynor: huge rise in companies hitting the rocks this year as insolvencies rise due to post Covid hangover, inflation and the problems caused by Brexit
The BBC have reported on a 19% rise in firms getting into financial difficulties against a background of rising insolvencies following the Covid crisis writes Harry Mottram.
They reported on insolvency firm Begbies Traynor who have given an update on the health of businesses in the UK.
Julie Palmer, a partner at the insolvency and restructuring specialist firm, said that in the first three months of this year there was a 19% rise in businesses in critical financial distress compared to the start of 2021.
In her report Julie Palmer said without further action to help struggling businesses there would be a wave of business failures. "It's just a case of when the dam holding it back finally bursts," she said.
Begbies Traynor said their research reflected the strain that the last two years of stop start economy caused by the Covid lockdowns had inflicted on business hundreds of firms on the brink of collapse.
Unsurprisingly the insolvency specialists cited construction and hospitality as those in most jeapody. To prevent a collapse of companies the Government needed to give further support said Julie Palmer."It's just a case of when the dam holding it back finally bursts," she said.
There was a mixture of reasons behind the potential collapse from rising inflation, the cost of paying back or servicing loans, a hike in wages and National Insurance payments, as well as the effects of Brexit and labour shortages in key sectors. With the cost of living rising, households have less cash to spend on treats such as nights out, holidays and expensive purchases.
Begbies Traynor's research highlights a sharp rise in County Court Judgements (CCJs), an early sign of future insolvencies, because they show creditors are making legal claims. CCJs were up 157% compared to a year ago, the report said. Julie Palmer said one way to help firms was for the Government, lenders and banks to extend repayment terms for Covid loans and be more flexible as firms struggle to repay.
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