Business distress increased in 19 out of 22 key sectors

Mon, April 20th, 2020

Number of firms in significant financial distress soars to 7,265

  •  Number of firms in significant financial distress soars to 7,265
  • 19 of 22 sectors saw increase in significant distress.
  • Full effect of lockdown may see ‘thousands of firms not survive this crisis’

19 out of the 22 key business sectors on Merseyside monitored by Begbies Traynor saw an increase in levels of financial distress in the first quarter of 2020.

7,265 firms on Merseyside ended Q1 of 2020 in significant financial distress - before the full impact of COVID-19 ‘lockdown’ - a rise of 5% on the previous quarter (6,901) according to the latest Red Flag Alert report produced by Begbies Traynor.

Hotels & Accommodation saw the biggest percentage quarterly increase of 19% while the Leisure & Cultural sector saw an increase of 13%.

Construction (996), Real Estate & Property (934) and Support Services (1,204) make up the largest volumes of distressed companies. Collectively, these three key sectors of the regional economy comprise of 3,134 companies - or 43% of all Merseyside-based companies in significant distress.

The year-on-year comparison was even bleaker with a 7% increase in the number of Merseyside firms experiencing significant financial distress compared to the same time last year.

More than half a million companies (509,315) in the UK are now operating under significant financial distress, according to the research by Begbies Traynor. That’s the highest number since this research began,

Keith Tully, partner at Begbies Traynor in Liverpool, said:

“These figures make grim reading and offer more insight into the shape of things to come for many businesses in our region. Even, without accounting for the full economic impact of lockdown they are troubling. At this rate of acceleration, coupled with the effect of lockdown, we could be looking at 10,000 by the end of the summer.

“Many of these companies were teetering on the brink of collapse before lockdown and it is not unreasonable to conclude that thousands of these companies will simply not survive without major restructuring of their operations and financial arrangements. The knock on effect of these companies fighting for their lives is that suppliers get left unpaid and find themselves pulled into deeper water.

“Company directors have a responsibility to act swiftly, get professional advice, restructure, refinance and make use of all the Government support available to ensure they still have a business when we all emerge from the other side of this crisis.”

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