Home Finance & Investments Almost 2,000 Humber firms now in financial difficulty as business distress soars...

Almost 2,000 Humber firms now in financial difficulty as business distress soars by 40% over year of pandemic

Andrew Mackenzie, Begbies Traynor

Businesses in the Humber region and across the UK are experiencing rapidly escalating levels of distress, despite Government support measures designed to avoid mass insolvencies.

According to the latest Red Flag Alert data, published 22 April 2021 by leading independent business rescue and recovery specialist Begbies Traynor, numbers of businesses showing early-stage, or ‘significant’, signs of financial distress had risen by 39% since Q1 last year, to affect 1,916 firms in the Humber region. In the last quarter alone 218 more Humber business had begun to experience financial problems, a 13% increase on Q4 2020.

The picture was reflected across the UK, which saw a 42% rise in symptoms of early distress, compared with the same quarter last year, immediately before the outbreak of the pandemic. ‘Significant’ distress rose by 15% quarter on quarter to affect 723,000 firms across the UK.
“It is enormously worrying that we are seeing distress levels rising so steeply across the board, despite the raft of support measures put in place by the Government to stave off widespread business collapse,” said Andrew Mackenzie, partner at Begbies Traynor in the Humber.

“It is inevitable that Government support will have to be withdrawn at some point, and, coupled with the fact that the courts are still struggling to catch up with a backlog of cases and that court action has only been stayed until the end of June under Corporate Insolvency and Governance Act 2020, it seems likely that what we are seeing in this latest Red Flag data unfortunately is the calm before a very turbulent storm for a large number of businesses.”

The past 12 months saw early-stage distress rise by more than a quarter across almost every business sector in the Humber region. Worst hit has been the construction industry, which now has more than 325 firms affected, up by 49% (or 107 businesses) on Q1 2020.

Across the retail, bars and restaurants sectors more than 300 Humber region companies are struggling, up 30% on the previous year, while 200 real estate and property services firms in the region are experiencing financial difficulties, a 42% year-on-year increase.

“For small business owners in particular it can seem that there is nowhere to turn in the face of such large-scale financial challenges but seeking professional help should always be the first port of call and can be a meaningful first step towards future-proofing business finances and management systems,” added Mr Mackenzie.