Business distress in Lincolnshire up by 3% amid Government financial measures to reduce covid impact – with the worst still to come
Government initiatives to protect business from the effects of lockdown and the coronavirus have helped to minimise financial problems among Lincolnshire businesses, which had increased by 3% to affect almost 5,600 firms in the second quarter of 2020, compared with Q2 of 2019, according to the latest research from leading independent insolvency and restructuring business advisory firm Begbies Traynor.
Published today (24July 2020), the Red Flag Alert data from Begbies Traynor reveals that in Lincolnshire 184 more businesses were in financial trouble by the end of June this year than at the same time in 2019. The 3% increase in ‘significant’ business distress, referring to businesses with relatively minor financial problems, such as having CCJs of less than £5,000 filed against them, or showing a marked deterioration in key financial indicators, is expected to rise significantly in the coming months. Temporary court closures during the pandemic are feared to be holding back a flood of businesses that are likely to fall into deeper financial distress.
Across the UK, distress rose by 9% year on year to affect 527,000 businesses. With 33,000 more firms in trouble than at the start of this year, the Red Flag Alert research has now recorded seven consecutive quarters of increasing distress, marking the longest period of increased distress since the start of 2014.
Gareth Rusling, who heads Begbies Traynor’s Lincolnshire offices in Lincoln, Scunthorpe and Grimsby, said that although the region had not yet seen large-scale increases in business distress, the severe effects of the pandemic were unlikely to become apparent until Q3. “Although relatively few Lincolnshire businesses have fallen into financial distress since the start of the coronavirus crisis, the true severity of the situation is being concealed by the current inaction on insolvent and distressed businesses in the courts.
“Once the furlough scheme is phased out, court actions have restarted and tax deferrals are due for repayment, on top of the demands of new loans and rent quarter days, we are likely to see the real impact of the pandemic. It looks likely that businesses will be fighting against a rising tide of distress that will get worse before it gets better.”
Of the business sectors in Lincolnshire showing the biggest increases in distress in Q2 2020 compared to Q2 2019, sports and health clubs was one of the hardest hit, with a 20% rise and 128 businesses affected. This was followed by industrial transportation, (up by 15%), printing and packaging, and food and drink production (both up 11%).
Mr Rusling added: “Businesses that have the capital and the ability will need to restructure if they are to survive, on the assumption that the world we now live in is here to stay for the foreseeable future. They cannot afford to operate on the unrealistic hope that a return to normality is just around the corner and so seeking professional advice as soon as possible may be essential in order to weather the storm.”
This was posted in Bdaily's Members' News section by Melanie Rice .