Coronavirus Crisis Holds 620,000 SMEs in Distress Endangering 2.8 Million Jobs

11th February 2021

The latest Business Distress Index from Real Business Rescue has revealed the number of SMEs in significant distress* now stands at 620,000 - an increase of 76,000 in Q4 2020 - putting 2.8 million jobs under threat.

The website RealBusinessRescue.co.uk, set up by Begbies Traynor Group to advise business leaders in financial distress, analysed data from Red Flag Alert and discovered that since lockdown, 118,000 more SMEs have been plunged into distress – a 23% increase since Q1 2020. In the last quarter alone, there has been an increase of 14%, or 76,000 businesses in distress.

In addition to this, Real Business Rescue discovered that the number of start-up businesses (born after 2017) in significant distress soared by 21% in the last quarter due to the pandemic. There are now 131,000 of these fledgling businesses in distress – a 68% increase since the start of lockdown when there were 78,000 start-up businesses in distress.

Despite these worrying rises in distress levels, company insolvencies across the board dropped 27% in 2020 compared to 2019 (12,557 vs 17,196); largely down to the swathes of government support helping to keep struggling businesses afloat. Winding-up petitions were also frozen which has led to few compulsory liquidations.

Shaun Barton, National Online Business Operations Director at Real Business Rescue, said:

"Our latest Business Distress Index has tracked the troubles that smaller businesses find themselves in over this period. These SMEs and start-ups don’t have the resources to fall back on like the more established companies which have been able to rely on stronger cash flow to survive through this pandemic. Many will have been living from month to month or on a quarterly basis, and this is why they have been hit so hard.

“This latest data highlights that while bigger companies can thrive as the world moves towards greater investment in tech, logistics and construction, smaller organisations can still suffer as huge contracts are hoovered up by their bigger counterparts and the usually fruitful market of mid-sized contracts dries up. But this data is not just useful insight to see where businesses are being tripped up; it is useful to highlight where, who, and how small businesses need help. And it is vitally important that this help is given because without the millions of SMEs in the country, the UK will slow in its development of ideas and progress and the economy will further recess.

“These businesses need to get ahead of the game by considering restructuring action now so that when the creditors come calling, they are in a good space. We can offer help on RealBusinessRescue.co.uk or on the phone to talk through the options such as CVAs, administration, or Fast Track CVAs for companies that were in a good profitable position before the pandemic. Alternatively, there is a good market for investors and buyouts. The only thing that business owners have to be wary about is that these investors are looking for a good deal in a down market. It’s an option for an exit, and it could be a good one, but expectations will have to be lower than before the pandemic.”

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