The Business Distress Index

The people at Real Business Rescue (part of the Begbies Traynor Group) have conducted some in-depth research into how COVID-19 has affected the UK business markets and various sectors. We are pleased to share the main findings with you, or you can read the full article here.

620,000 SMEs in significant distress

The latest Business Distress Index from Real Business Rescue has revealed the number of SMEs in significant distress now stands at 620,000. Since lockdown started in Q1 2020, 118,000 more SMEs have been plunged into distress – a 23% increase since Q1 2020. In the last quarter alone, there has been an increase of 14%, or 76,000 businesses in distress.

‘Significant’ distress‘ is those businesses with minor CCJs (of less than £5k) filed against them or which have been identified by Red Flag Alert’s proprietary credit 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.

In addition to this, Real Business Rescue discovered that the number of start-up businesses (born after 2017) in significant distress soared by 21% in the last quarter due to the pandemic. There are now 131,000 of these fledgling businesses in distress – a 68% increase since the start of lockdown when there were 78,000 start-up businesses in distress.

2.8 million jobs at risk

The 620,000 businesses in distress hold a total of 2.8 million jobs, meaning that this is the number of people at risk of redundancy.

There are more than half a million (516,000) jobs held by the 99,000 support services businesses in significant distress, 349,000 people employed by 35,000 troubled health and education businesses, and 218,000 people employed by 79,000 construction SMEs.

Insolvencies dropped by 27%

Despite these increases in distress for many companies, the number of corporate insolvencies dropped by 27% in 2020. There were 12,557 insolvencies compared to 17,196 in 2019 – largely down to the government’s Covid-19 support schemes that are helping to keep many troubled businesses afloat.

Top 5 regions in distress

The top 5 regions with the largest increase in distressed businesses are:

1. London (26% increase)
2. The South East (21% increase)
3. The North East (21% increase)
4. Northern Ireland (20% increase)
5. The Midlands (19% increase)

Wales has seen the smallest increase in distressed business, but even they have seen an increase of 16%.

Top 3 sectors in distress

1. Support Services 2. Health & Education 3. Construction

How can we help?

Remember that we are the experts in helping businesses survive through rigorous credit control and debt collection, and we are more than happy to help you with any issues you may have.

Feel free to contact us for a no obligation chat in total confidence, or arrange your Free Debtor Collateral Review to find out your Position. 

Call us on 0845-6385256 or email info@credebt.co.uk