Worsening of companies’ balance sheets comes as a worrying sign for the UK’s recovery prospects

There has been a record jump in the number of United Kingdom (UK) businesses now in significant financial distress, the most in at least seven years.

The spike in the numbers came last quarter, as firms across all sectors of the economy are seeing their financial situation deteriorating. Research published today by intelligence provider, Begbies Traynor, showed that there are now 723,000 companies facing serious financial problems.

This represents a 15 per cent jump from the December 2020 quarter and the biggest quarterly increase since it began publishing the data back in 2014. The climb from March 2020 to March 2021 has been 42 per cent.

This latest news of the worsening of companies’ balance sheets comes as a worrying sign for the UK’s recovery prospects, even as the economy begins to open up following months of lockdown. This has occurred despite billions in government support.

Firms left battered from restrictions in spite of government support

Many firms have been left battered from restrictions with heavy debts that could leave them vulnerable when help is withdrawn. Financial distress in transport and logistics, real estate and financial services, all surged by at least 50 per cent, despite strong demand for their services through the latest restrictions, the analysis found.

The biggest deterioration occurred in Northern Ireland and the Northwest of England but London’s reliance on both the leisure and hospitality sector and finance firms also left it vulnerable, Begbies Traynor said.

Begbies Traynor has defined companies in significant distress as businesses with minor county court judgments filed against them or those identified by a sustained or marked deterioration in key financial ratios and indicators including those measuring working capital, contingent liabilities, retained profits and net worth.