Business distress was becoming more prevalent across every sector of the economy, both in the Humber region and in the 海角视频 as a whole, immediately before the coronavirus outbreak.
The latest quarterly analysis from insolvency specialist Begbies Traynor revealed levels of financial distress rising both quarter on quarter and year on year in the first three months of 2020.
In the Humber region, two of the industries hardest hit by social distancing measures - bars and restaurants, and real estate - saw a 35 per cent and 9 per cent hike in distress levels respectively, compared to the same period in 2019, leaving them ill-equipped to withstand the financial consequences of the pandemic.
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Almost 70 bar and restaurant businesses and 140 estate agents and other property services firms in the region were already suffering from financial problems by the time the full lockdown was put in place across the country at the end of March, the Red Flag Alert published on Friday revealed.
Other studies have already found Brexit uncertainty was causing a problem through to late 2019, with Christmas potentially covering over this for many. Earlier this week NatWest revealed business activity had seen its sharpest decline since the recession bit hardest just over a decade ago.
By quarter one of this year, the Humber region had a total of 1,376 financially distressed businesses, up by 4 per cent on 2019 and by 3 per cent on the previous three months. Across the 海角视频 as a whole more than half a million (509,314) companies were already in financial distress, a figure that had climbed by 3 per cent since the previous quarter and by 5 per cent year on year.
The ‘significant distress’ measured in Begbies Traynor’s report refers to companies 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 ratios and indicators. It is often viewed as a warning of more serious financial problems to follow.
Andrew Mackenzie, partner at Begbies Traynor in the Humber region, with a Scunthorpe office recently opened, said: “In the face of the fastest and most severe global economic crisis ever seen, it is extremely worrying that swathes of businesses, the majority of them SMEs, were already suffering from financial distress, making post- covid-19 recovery a far less likely prospect for those firms.
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“Sectors such as hospitality and property in particular have been sent reeling by the social distancing measures that have forced the temporary closure of their businesses, and unfortunately it’s likely that only robust and resilient firms will be able to pick themselves up from this as the economy continues in freefall.
Coronavirus and the Humber:
“The unprecedented Government measures to protect the income of both individuals and businesses are a welcome intervention, but while it may be the salvation of stronger organisations, state support is likely to have the effect of simply delaying the inevitable for too many companies and we expect to see a significant rise in insolvencies.
“The best current advice for business owners is to thoroughly research all the forms of help that are available, from investigating their insurance cover and talking to the bank to calling on the expertise of professional advisers, in order to gain vital breathing space in the face of these immense challenges.”