620,000 small- and medium-sized enterprises (SMEs) are now in “significant financial distress”, with the property sector among those hardest hit, new research has found.
This is a 14 per cent increase over the last quarter, and a 23 per cent increase since the first lockdown in March 2020.
The latest Business Distress Index from insolvency practitioners Real Business Rescue, part of the Begbies Traynor Group, also found a 20 per cent increase in property SMEs in significant distress in the last quarter, rising to 73,756.
Other sectors particularly impacted included the hotels sector, which saw a 19 per cent increase in significantly distressed SMEs, support services at 16 per cent and manufacturing at 15 per cent.
Across all sectors, start-ups appeared to be suffering amid the pandemic.
Real Business Rescue, which analysed Red Flag Alert data, found that the number of businesses launched after 2017 in significant distress rose by 21 per cent in the last quarter to 131,000.
“Our latest Business Distress Index has tracked the troubles that smaller businesses find themselves in over this period,” said Shaun Barton, national online business operations director at Real Business Rescue.
“These SMEs and start-ups don’t have the resources to fall back on like the more established companies which have been able to rely on stronger cash flow to survive through this pandemic.
“Many will have been living from month to month or on a quarterly basis, and this is why they have been hit so hard.
“This latest data highlights that while bigger companies can thrive as the world moves towards greater investment in tech, logistics and construction, smaller organisations can still suffer as huge contracts are hoovered up by their bigger counterparts and the usually fruitful market of mid-sized contracts dries up.
“But this data is not just useful insight to see where businesses are being tripped up; it is useful to highlight where, who, and how small businesses need help. And it is vitally important that this help is given because without the millions of SMEs in the country, the UK will slow in its development of ideas and progress and the economy will further recess.”