(Alliance News) - UK businesses are bracing for the full force of debts accumulated during the pandemic to hit as Covid reliefs unwind, a new report has claimed.
Corporate restructuring specialist Begbies Traynor Group PLC said there have been significant spikes in key indicators that companies are under pressure.
The number of UK businesses that reported "significant financial distress" rose in the three months to the end of December to 589,168.
That is a 5% increase from the quarter before.
The company's data also shows that the number of County Court Judgments has more than doubled.
This is a "key early sign of future insolvencies", Begbies said, as creditors head to courts to reclaim what they are owed.
If businesses cannot pay up, many will fall into insolvency.
"The latest data indicates that the debt storm which has been brewing for years, but had been held off by measures to provide breathing space for companies, could now be about to hit, sending shockwaves through many industries," Begbies said.
"As Covid reliefs unwind, financially distressed companies brace for full force of debts to hit."
Separate figures from the Insolvency Service on Friday showed that the number of creditors' voluntary liquidations rose 15% to 4,175 between the third and fourth quarters of 2021.
Compulsory liquidations rose from 110 to 147, while "other insolvencies" jumped from 188 to 305.
Julie Palmer, a partner at Begbies, said: "Businesses that have bravely battled through the pandemic could now start to fail as the pressures they face become too much.
"Support from the government such as furlough payments, tax reliefs and a moratorium on landlords being able to evict businesses due to rent arrears cannot go on forever.
"Without these measures in place to protect them, a rising number of companies will have no other option but to relinquish their business after two years of struggling on in the economic uncertainty that has been tempered by measures to combat the impact of coronavirus."
She warned that, together with the economic fallout from Covid, a spike in inflation has caused the "perfect economic storm" for many smaller companies.
Inflation is the biggest threat to the economy, Palmer said, and the construction sector is looking especially shaky as it also faces shortages of raw materials.
Yet the taxman is at least trying to help. "Anecdotally, we are hearing stories about HMRC giving companies two or even three years to pay their tax bills," Palmer said.
"Extra leniency may not be an official policy, but it sends a signal that officials are trying to help businesses survive – even though it might only be delaying the inevitable."
By August Graham, PA City Reporter
source: PA
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