The number of small- and medium-sized enterprises (SMEs) in distress dropped by 9.75 per cent in April to June, the first quarterly decline since before the pandemic, new research has found.
Insolvency practitioners Real Business Rescue’s Business Distress Index for the second quarter of this year showed 643,500 SMEs were in distress, 69,500 fewer than during the first quarter, as lockdown restrictions were eased.
Northern Ireland was home to the biggest improvement in the second quarter, with the lowest number of SMEs in distress (9,762) and the highest percentage of SMEs moving out of distress (15.1 per cent). Meanwhile, at the other end, London saw the most SMEs in distress at 171,319.
The sector suffering from the most jobs in danger was support services (518,288), followed by health and education (370,547) and construction (249,673).
At the other end of the spectrum, general retailers had the fewest jobs at risk (159,102), followed by telecommunications and IT (185,081) and bars and restaurants (200,692).
Manufacturing has seen the biggest improvement, with a 9.8 per cent fall in jobs in danger compared to the first quarter.
The research showed that three million SME jobs were in danger in the second quarter, although this is a six per cent drop from 3.2 million in the first quarter.
However, the number of company insolvencies rose by 31 per cent from the first three months of the year to reach 3,116 from April to June, the highest quarterly insolvency figure since before the pandemic began.
“This second quarter data represents a different story to what we’ve seen in the last 18 months; portraying a brighter picture with distress levels decreasing thanks largely to lockdown-easing in April and trade resuming for many businesses,” said Shaun Barton, national online business operations director at Real Business Rescue.
“But while that’s positive, there are two stories to tell here. The second being that corporate insolvencies (companies entering into insolvent liquidation) are on the rise which seems to contradict the overall picture of positivity, but we feel there’s a reason for this.
“While many businesses opened their doors in April and started getting back on their feet, this led to a decrease in levels of significant distress levels. But some businesses quickly realised they couldn’t manage the accrued liabilities over the previous 12-15 months.
“Many SMEs saw arrears building up throughout the pandemic such as landlord and rent payments, VAT, PAYE, and on top of this we saw bounce back loan repayments beginning in the second quarter as well.
“You can understand why an increasing number of SMEs were simply unable to cope with the heightened cashflow pressure upon re-opening which has led to a rise in voluntary liquidation processes.
“So, the overall picture is healthier with the caveat that some businesses, that just about kept their heads above water throughout the pandemic, are now starting to fall away.”