The South West is braced for a surge in the number of companies becoming insolvent, a leading business recovery expert says.
Andy Pinchin, of South West restructuring practice Lameys, said the firm is already very busy with inquiries from firms worried about insolvency, and whether they will end up in administration or even being liquidated.
Many of these are in the hospitality and tourism sector, he said, or businesses that supply the sector, such as food and drink producers.
Mr Pinchin, assistant insolvency manager in the firm's Plymouth operation, said the number of inquiries from troubled businesses is at a level not seen since the financial crash and deep recession of 2008 and 2009.
And he warned the situation could become even worse later in the year as Government support packages, such as the Coronavirus Job Retention Scheme, which furloughs workers, come to an end.
Though he stressed that for many firms that will actually go under “Covid-19 is the final nail, rather than the driver”.
“I expect to see an increase in distressed businesses,” Mr Pinchin said. “Predominately in hospitality and tourism.”
He said Lameys has already been approached by businesses that have found their cashflow has been squeezed during the coronavirus lockdown.
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Some have been turned down for Government support packages, such as the Coronavirus Business Interruption Loan Scheme, or even if they have been able to furlough workers, have seen other overheads continue to be a drain on finances. But generally they have been hit by lockdown measures.
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And, he said, there are many businesses in the hospitality sector that are still unable to open on July 4, when Government lockdown restrictions are eased further.
“There are a lot of distressed businesses looking for advice,” he said. “We are very busy. It is from a variety of businesses, but there is a high dependency on tourism and businesses that supply tourism.
“I have known it to be as busy as this before, and compare it to 2008 and 2009, but the difference is the uncertainty, there is no clear end to this and no clarity on how it sill impact certain businesses and industries and what additional support government, local and national, will be able to provide.”
So, he said that situation is likely to continue, although added the caveat that “we don’t know what the Government is going to do next week” and therefore could not rule out further intervention from Westminster.
“The local economy may benefit from an upturn in trade in the next couple of months,” Mr Pinchin said. “But it won’t average anything like the levels we would normally expect. So these companies would gain a bit of cashflow over the summer and then the difficult discussions start.”