Begbies Traynor: Small businesses vulnerable to impending repayments

24th January 2023 | Jack Oliver

Insolvency firm Begbies Traynor has warned that small companies will be especially vulnerable to collapse, as repayments on COVID loans, cuts to energy bill relief and high inflation all loom.

In the firm’s latest Red Flag Alert report for the fourth quarter, it was revealed that over 610,000 British businesses are in ‘significant’ distress, 4% higher than a year ago.

Compared to pre-Pandemic levels, there has been a rise in businesses being in ‘critical’ and ‘significant’ distress, with increases of 11% and 24% respectively.

It has also been revealed that in the final three months of 2022, nearly 24,000 County Court Judgements were served, 52% higher than in 2021 and 77% higher than pre-COVID.

The Red Flag Alert report is a measure of the health of British businesses which has been running for over 15 years, and Begbies Traynor says this latest report shows the immense strain on an increasing amount of companies.

Julie Palmer, partner at Begbies Traynor, said: “What we are hearing from directors of businesses is extremely distressing.

“We came into 2022 hopeful that the pandemic was fully behind us and better times were ahead, only for Russia’s invasion of Ukraine to unsettle the global economy, leading to spiralling inflation and soaring energy bills and laying the foundations for what looks like a global recession. In the UK, in particular, strikes are just piling on the pressure as staff struggle to get to work and customers stay away.

“We’re taking calls from company bosses who are having trouble digging deep enough to keep battling on. They are already having to pay back the support they took to get through Covid and, anecdotally, we are hearing that both the Government and HMRC are becoming more determined in pursuing debts, while other creditors are increasingly turning to the law to recover their debts.

“Throw in a such a gloomy economic outlook, with inflation at 40-year highs and interest rates at levels not seen for 14 years, and you can see why more and more companies are starting to feel the burden of their debts, making directors question whether they can go on.”

Read the full report here.


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