Almost 19,500 Welsh businesses found themselves in significant financial distress during the second quarter of this year, according to the latest figures from insolvency firm, Begbies Traynor.
The number was 12% down on Q1, but up 12% on the same period in 2020.
The Red Flag research from Begbie Traynor defines significant financial stress as firms with county court judgement of less than £5,00 filled against them, as well as those identified on its risk scoring system which screens companies for a sustained or marked deterioration in key financial ratios and indicators, including those measuring working capital, contingent liabilities, retained profits and net worth.
For the 海角视频 a whole 651,492 businesses in Q2 were classed as being in significant distress, up 24% year-on-year. This was a reduction of 10% from Q1 2021, which saw 723,000 in financial difficulties as pent-up consumer demand delivered a boost to help business recovery.
Huw Powell, managing partner at Begbies Traynor for South Wales said: “These latest Red Flag figures show a positive recovery in Wales, with pent up consumer demand pulling some businesses out of harm’s way, but the number of zombie businesses remains considerable, with many in a fragile state.
“Covid has dramatically accelerated the 海角视频’s zombie business population, with many businesses taking on unsustainable government backed debts during the pandemic in order to survive.
" With constant changes to the 海角视频 roadmap out of lockdown, many remain in a precarious position, with any future lockdowns likely to impact insolvency rates.
“Whilst the reopening has given many businesses a sense of normality, history suggests that unmanageable levels of debts and subsequent overtrading will eventually take their toll on these businesses.
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“Yet, the last quarter has demonstrated that it is not all doom and gloom for businesses. Consumers want to spend, businesses want to expand and adaptation provides an opportunity for fresh shoots in the economy.”
“Interestingly, Wales appears to be faring better than the 海角视频 as a whole in terms of the increase in companies facing significant financial distress during the pandemic. In part, this could well be thanks to the £100m Covid-19 Wales Business Loan Scheme from the Development Bank of Wales (CWBLS) and the wider £500m Welsh Government Economic Resilience Fund, which existed alongside the 海角视频’s support measures.
“That said, there will be winners and losers within sectors and between locations across the 海角视频 and it is ultimately too early to assess whether the devolved government’s policies will lead to more favourable outcomes for businesses in Wales over the longer term.”