The number had grown over the last few months but dropped slightly by eight per cent between April and June
A Swindon insolvency firm has found that over 1,800 businesses around Swindon are in financial distress.
The number had grown over the last few months but dropped slightly by eight per cent between April and June, though the figure is still 14 per cent higher than it was this time last year.
Begbies Traynor’s ‘red flag’ research revealed that construction and professional services companies had struggled the most and while there were signs of recovery, the end of the furlough scheme and increasing court action expected in September could bring bad news.
The ‘zombie businesses’ which have stumbled along without much activity may be killed off by court action when insolvency judgments are made later in the year.
Partner Julie Palmer said uncertainty about the housing market and problems with the supply chain are causing problems for the construction industry while difficulty adapting to remote working and courts facing a logjam of cases affected professional services which rely on lawyers.
She added: Even if builders are being booked, there’s a supply chain problem as the pandemic and Brexit are starting to bite.
A lack of materials in the supply chain increases prices, any project delays will add extra costs and start squeezing their margins so it’s more of a challenge to price contracts accordingly, plan how long they will take, and turn projects into profits, she said. There are ‘zombie’ businesses which have hobbled on, just about surviving by borrowing money, relying on low interest rates and HMRC support, but they’re stagnant and occupying space.
There will be a summer lull in insolvencies but the courts have just reopened and there’s a wall of creditor action and landlords asking for unpaid rent, so this figure will increase as zombie businesses are flushed out by county court judgements and winding-up petitions, she said.
Swindon and Wiltshire Local Enterprise Partnership director Paddy Bradley had a similar outlook and also expected newer, fresher companies to replace older struggling ones on the brink of bankruptcy.
Businesses have taken out loans which are coming due but they have not had enough income to pay those off and had to run down their reserves, he said.
He said Furlough is easing off and requiring more contributions from employers but some businesses are operating solely because of the loans. When it ends, more people will be unemployed and that will have a knock-on effect on different sectors.